Dollar Poised for Weekly Gain Versus Euro as U.S. Slowdown Concerns Ease
Sept. 10 (Bloomberg) -- Piero Ghezzi, head of economics and emerging-markets research at Barclays Capital, talks about Barclays's new Fiscal Vulnerability Index, which measures the sovereign debt risk of countries. Ghezzi speaks with Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
Sept. 6 (Bloomberg) -- Simon Derrick, chief currency strategist in London for Bank of New York Mellon Corp., talks about foreign exchange including the outlook for the euro, the pound and the dollar. He speaks with Andrea Catherwood on Bloomberg Television's "The Pulse." (Source: Bloomberg)
Sept. 9 (Bloomberg) -- Bill Hubard, chief economist at MIG Bank SA, talks about Norway's strategy to buy bonds of Greece, Italy, Portugal and Spain. He speaks with Andrea Catherwood on Bloomberg Television's "The Pulse." (Source: Bloomberg)
The euro headed for its biggest weekly decline in a month versus the dollar on speculation sovereign-debt risk will hinder prospects for the euro-zone’s economic recovery.
The greenback traded near its strongest level this month against the European currency before reports next week which may ease concern the U.S. economy is slowing. The yen declined against higher-yielding currencies as Asian stocks rose after a report showed Chinese imports grew more than economists forecast, damping demand for the safer investments.
“The focus is back on the European sovereign crisis, and we are in the first stages of concerns about re-coupling between the U.S. and European economies,” David Deddouche, a foreign- exchange strategist for Societe Generale SA in Paris.
The euro traded at $1.2675 as of 9 a.m. in London from $1.2696 in New York yesterday, after falling to $1.2644, the weakest since Aug. 31. The greenback is poised for a 1.6 percent gain this week, the most since the period ended Aug. 13. The dollar was at 84.03 yen from 83.78. The yen dropped to 106.52 per euro from 106.37.
The dollar was bolstered before U.S. reports next week that economists said will show consumer spending rose for a second month and manufacturing in the New York region expanded.
“The tone of data from the U.S. has improved slightly and gives the sense that an awful lot of the bad news has been written in,” said Robert Rennie, head of currency research in Sydney at Westpac Banking Corp., Australia’s second-largest lender. “The dollar can do better into October.”
Bet on Dollar
Sales at U.S. retailers rose 0.3 percent in August and the Federal Reserve Bank of New York’s general economic index climbed to 9 in September from 7.1 the previous month, according to separate Bloomberg News surveys before the figures are released on Sept. 14 and 15.
Westpac recommended investors bet the dollar will strengthen against the yen by buying a two-week option to purchase the greenback at a strike price of 85 yen. Yield differentials between the U.S. and Japan are moving back in the dollar’s favor, Westpac said.
The extra yield offered by two-year Treasuries over similar-maturity Japanese notes widened to 43 basis points yesterday, the most in six weeks.
“People may see a budding trend that key U.S. data continue to get better,” said Keiji Matsumoto, a strategist at Nikko Cordial Securities Inc. in Tokyo. “That may stop dollar weakness briefly. The bias is for the yen to weaken.”
Yen Declines
The yen dropped for a third day against the Australian dollar after China posted its third-consecutive trade surplus of more than $20 billion, spurring gains in Asian stocks.
The MSCI Asia Pacific Index of shares rose 0.4 percent, rallying for a second day. Futures on the Euro Stoxx 50 Index fell 0.4 percent. China’s exports climbed 34.4 percent in August, and imports grew a more-than-forecast 35.2 percent, according the customs bureau said today. China is Australia’s largest trading partner.
“There’s been a cautious ratcheting up of risk appetite this week,” said Michael McCarthy, head of Asia-Pacific dealing at City Index Ltd. in Sydney “There’s more of a search for return,” supporting higher-yielding currencies, he said.
The yen dropped 0.2 percent to 77.50 per Australian dollar after touching 77.80, the weakest since Sept. 3.
The euro earlier fell against all 16 major currencies after European Central Bank President Jean-Claude Trichet said in an interview with the Financial Times published yesterday that it will take time to wean banks off its emergency lending measures.
‘High’ Risks
ECB executive board member Miguel Angel Fernandez Ordonez said yesterday another bout of financial instability can’t be ruled out.
“Banks and savings banks should continue to think about strengthening their financing structure,” Ordonez said. While using financing from the ECB is “normal,” it shouldn’t become a “permanent” channel, he said.
“The risks are pretty high that these banking issues in Europe will flare up again,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia. “Long- term that will definitely be a negative for the euro-dollar.”
The euro may fall below 100 yen to a nine-year low, Ueda Harlow Ltd. said, citing trading patterns.
A weekly ichimoku chart shows the common currency has stayed below the so-called conversion line and baseline, said Toshiya Yamauchi, a senior currency analyst in Tokyo at the online currency-trading company. That indicates any gains for the euro are likely to be capped, he said.
The euro is set to drop to 105.44 yen, matching the level reached on Aug. 24 that was the lowest since July 2001, he said. Should it fall below that value, its next target will be 100 yen, a key psychological barrier, Yamauchi said.
To contact the reporters on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net.
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