Dollar Falls to 15-Year Low Against Yen on Fed Easing Outlook After G-20
The dollar fell to a 15-year low versus the yen after a Group of 20 pledge to avoid “competitive devaluation” failed to dispel bets that the Federal Reserve will debase the greenback by announcing more bond purchases.
The U.S. currency slid against 15 of 16 major counterparts as investors added to bets that a boost in quantitative easing will support higher-returning assets. Sterling fell to the lowest level against the yen since February 2009 as declining mortgage approvals in the U.K. spurred speculation that the Bank of England will buy more debt.
“If you look at all the currencies, it’s the dollar that’s weak and the pound that’s weak,” said Brian Dolan, chief strategist at FOREX.com, a unit of the online currency trading firm Gain Capital in Bedminster, New Jersey. “These are the only two countries that are talking about quantitative easing.”
The U.S. currency dropped as much as 1.2 percent to 80.41 yen, the weakest level since April 1995, before trading at 80.82 at 5 p.m. in New York, compared with 81.38 on Oct. 22. The dollar fetched $1.3966 per euro, compared with $1.3954, after touching $1.4159 on Oct. 15, the weakest level since Jan. 26. The euro decreased 0.6 percent to 112.87 yen, from 113.53 yen.
The dollar cut its losses against the euro today after an industry report showed sales of existing homes in the U.S. beat the median forecast of economists when they rose 10 percent in September to an annual rate of 4.53 million.
“The catalyst was the U.S. data,” said Firas Askari, head currency trader in Toronto at Bank of Montreal. “It’s very hard to buy euro up here.”
Euro Bets
Figures from the Washington-based Commodity Futures Trading Commission showed on Oct. 22 that traders increased bets to almost the highest level since October 2009 that the euro will gain against the dollar, indicating that the common currency’s rally may be poised for a reversal.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners including the euro, yen, pound and Canadian dollar, fell 0.4 percent to 77.160. It rose 0.6 percent last week in its first five-day gain since Sept. 10.
The gauge of the U.S. currency has dropped 10 percent since June 30 on rising speculation the Fed will add to asset purchases to boost the economy in a practice known as quantitative easing. The Fed is next due to decide on policy at its Nov. 2-3 meeting.
Colombian Peso
Colombia’s peso declined as much as 0.4 percent to 1,835.60 against the dollar, the weakest level since Aug. 13, after President Juan Manuel Santos said the South American nation will take measures this week to slow the currency’s advance. Business associations said in a letter this month that the currency’s gain threatens jobs and “jeopardizes the Colombian economy’s positive outlook.”
The peso has rallied 11.7 percent this year in the best performance versus the greenback among six Latin American currencies tracked by Bloomberg.
The pound depreciated as much as 0.9 percent to 126.46 yen, the lowest level in almost two years, as investors speculated the Bank of England will step up quantitative easing. Bloomberg Correlation-Weighted Currency Indexes tracking 10 developed- world currencies show the pound has fallen 5.1 percent since July 30, while the dollar has decreased 5.4 percent.
Sweden’s krona rose to its strongest level in three weeks against the euro and was at almost a two-year high against the dollar as traders speculated that the central bank will raise interest rates tomorrow.
‘Normal Borders’
“With central banks around the globe in focus, the Riksbank decision might reverberate beyond the normal borders,” Matthew Strauss, senior currency strategist at Royal Bank of Canada in Toronto, wrote in a research note.
The krona gained as much as 0.6 percent to 9.1837 per euro, the strongest level since Oct. 1. The currency gained 0.6 percent to 6.5835 versus the dollar after touching 6.5161 on Oct. 15, the strongest level since September 2008.
The yen remained stronger than 82.88 per dollar, where it traded on Sept. 15, when Japan acknowledged selling the currency to help its export-dependent economy. Toshiba Corp. will prepare ways to withstand an exchange rate of 70, including halting unprofitable operations, Nikkei English News reported, citing Toshiba’s president, Norio Sasaki. The yen appreciated to a post-World War II record of 79.75 per dollar in April 1995.
“The Japanese are concerned about intervening in the middle of all these high-level policy meetings,” said Jens Nordvig, a managing director of currency research in New York at Nomura Holdings Inc., in an interview on Bloomberg Television’s “Surveillance Midday” with Tom Keene.
To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
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