Dollar Gains Versus Most Counterparts on Haven Demand as Mubarak Resigns

The dollar rose against most of its major counterparts as Egyptian President Hosni Mubarak stepped down and handed power to the military, stoking demand for the safety of U.S. assets.

The greenback gained for a third week versus the euro as Mubarak bowed to the demands of protesters, who are likely to call for immediate elections. The euro remained lower today against the dollar as the head of Germany’s central bank resigned and U.S. consumer confidence rose this month.

“It’s concern about the military still being in charge and does this spread to neighboring countries in the Middle East,” said Paresh Upadhyaya, head of Americas G-10 currency strategy at Bank of America Corp. in New York. “There are worries about instability.”

The dollar strengthened 0.4 percent to $1.3554 per euro at 5 p.m. in New York, from $1.3603 yesterday, when it rallied 1 percent. The greenback gained 0.2 percent this week against the common currency. The dollar advanced 0.2 percent today to 83.43 yen. The euro declined 0.1 percent to 113.06 yen.

“Mubarak has decided to waive the office of the presidency,” said Vice President Omar Suleiman in a statement on state TV today. “He has instructed the Supreme Council of the armed forces to take over the affairs of the country.”

Protests in Egypt, inspired by the revolt that ousted Tunisian President Zine El Abidine Ben Ali on Jan. 14, sparked concern that tension would spread in a region that holds more than 50 percent of the world’s known oil reserves.

Canadian Dollar

Canada’s dollar rose against all of its 16 most-traded peers as the nation unexpectedly posted its first trade surplus in 10 months and the U.S. trade deficit widened 5.9 percent to $40.6 billion, in line with forecasts. The Canadian currency climbed 1.1 percent to C$1.3393 per euro.

Mexico’s peso was the second-best performer, appreciating 0.4 percent to 12.0270 per greenback.

The euro remained lower versus most major peers after the German government said Bundesbank President Axel Weber will leave office on April 30. A successor will be named during the next week, Steffen Seibert, a government spokesman, said after Weber met in Berlin with Chancellor Angela Merkel.

The decision takes Weber, 53, out of the race to succeed Jean-Claude Trichet as president of the European Central Bank when Trichet’s term expires on Oct. 31. The German official is leaving for “personal reasons” after deciding to step down on Feb. 8 and then being asked by Merkel to postpone the announcement, the Bundesbank said.

‘Outspoken Hawk’

Weber is “the most outspoken hawk on the ECB” and his exit would probably lower the likelihood of aggressive interest- rate boosts, Todd Elmer, Singapore-based head of Group-of-10 currency strategy for Asia excluding Japan at Citigroup Inc., said yesterday in a Bloomberg Television interview.

IntercontinentalExchange Inc.’s Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, climbed as much as 0.6 percent to 78.697, the highest level since Jan. 21. The gauge rose 0.5 percent this week in its first five-day rally in five weeks.

The dollar was gained 1.6 percent for the past five days versus the yen, its biggest weekly rise since Jan. 7. It touched 83.68 yen today, the strongest level in five weeks.

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose to 75.1, the highest level since June, from 74.2 in January, in line with the median forecast of economists in a Bloomberg News survey.

‘Decent-Sized Move’

The greenback strengthened beyond $1.35 per euro for the first time since Jan. 21, gaining 0.8 percent to touch $1.3497.

“The reason we’re seeing a decent-sized move like this is because the outlook in the U.S. is better,” said Jens Nordvig, a managing director of currency research in New York at Nomura Holdings Inc. “We’re really pricing in a Fed exit from zero interest rates in the next year.”

The Federal Reserve has kept its key interest rate at zero to 0.25 percent since December 2008 to support economic growth. Analysts forecast the central bank will raise the rate to 0.5 percent by year-end, according to a Bloomberg News survey.

The U.S. unemployment rate dropped to 9 percent and manufacturing and service industries grew in January, data from the Labor Department and the Institute for Supply Management showed last week.

The U.S. currency strengthened the most over the past week in a basket of 10 developed-nation currencies, gaining 0.9 percent, according to Bloomberg Correlation-Weighted Currency Indexes. The Swiss franc dropped the most, 1.2 percent.

Aussie Weakens

Australia’s currency slid below parity with the dollar today after Reserve Bank Governor Glenn Stevens said in parliamentary committee testimony that policy makers judged it “sensible” to keep interest rates on hold. Traders cut bets on the amount rates will be increased over the next 12 months to 0.35 percentage point, from 0.41 yesterday, according to a Credit Suisse Group AG index based on swaps.

Australia’s currency fell 0.2 percent to $1.0023, from $1.0044. It dropped as much as 0.8 percent to 99.61 U.S. cents, the lowest level since Jan. 31.

South Korea’s won was the worst performer among the greenback’s major counterparts after the central bank unexpectedly held off from raising interest rates. It touched 1,128.70 per dollar, the weakest level since Jan. 11.

To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; 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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