Yen, Franc Rise on Safety; Euro Reaches 17-Month High Versus Dollar on ECB
Euro Approaches 18-Month High Versus Dollar
Chris Ratcliffe/Bloomberg
The euro rose against the dollar, approaching its strongest in 18 months.
The euro rose against the dollar, approaching its strongest in 18 months. Photographer: Chris Ratcliffe/Bloomberg
May 4 (Bloomberg) -- Thomas Kressin, head of the European foreign exchange desk at Pimco Europe Ltd., comments on the outlook for the euro in an interview with Bloomberg's Anchalee Worrachate in London yesterday. (Source: Bloomberg)
May 3 (Bloomberg) -- Robert Sinche, global head of currency strategy at RBS Securities, talks about the outlook for the dollar and euro, and China's currency policy. Since speaks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)
The yen and franc gained against most major counterparts, with the Swiss currency touching a record high against the dollar, as a drop in commodities and stocks damped appetite for higher-yielding assets.
The euro reached its strongest in 17 months versus the dollar on speculation European Central Bank President Jean- Claude Trichet will signal further interest-rate boosts after a policy meeting tomorrow. New Zealand’s dollar and Brazil’s real were the worst-performing major currencies. The Dollar Index touched the lowest since 2008 on weaker-than-forecast data and speculation the Federal Reserve will maintain economic stimulus.
“Those safe havens, the yen and the Swiss franc, are much stronger,” said Brian Dolan, chief strategist at FOREX.com, a unit of online currency trading firm Gain Capital in Bedminster, New Jersey. “It’s a risk liquidation taking place.”
The yen appreciated 0.4 percent to 80.61 per dollar at 5 p.m. in New York after earlier touching 80.44, the strongest since March 18. The franc strengthened to a record 85.54 centimes per dollar before trading at 86.22 centimes.
The euro was little changed at $1.4827, compared with $1.4825 yesterday. It touched $1.4940, the highest level since it reached $1.5091 on Dec. 4, 2009. The shared currency dropped 0.4 percent to 119.55 yen, from 119.99.
Strongest Since Intervention
The yen’s strongest level of the day was the most versus the dollar since the Group of Seven nations jointly intervened in the currency market in an effort to weaken the Japanese currency. Central banks intervene by buying or selling currencies. The yen had advanced to a post World War II high of 76.25 per dollar after the country’s worst earthquake on record.
The Standard & Poor’s 500 Index fell 0.7 percent and the Thomson Reuters/Jefferies CRB Index of raw materials slid 1.8 percent. Crude oil for June delivery lost as much as 2.3 percent to $108.48 a barrel in New York, its lowest in two weeks.
The Canadian dollar fell for a third day against its U.S. counterpart, the longest losing streak since March, as crude oil dropped. The commodity is Canada’s biggest export. The currency traded at 95.91 U.S. cents, down 0.7 percent.
New Zealand’s dollar, nicknamed the kiwi, weakened after Statistics New Zealand said permanent migrant departures exceeded arrivals by 530 in March, the most since a net 2,400 in February 2001. The nation produces commodities for export.
The kiwi slid 1.1 percent to 78.99 U.S. cents after touching 78.66, the lowest level since April 19. It tumbled as much as 1.9 percent to 63.39 yen, the weakest since April 1.
Brazil’s Real
The Brazilian real weakened as much as 2 percent to 1.6189 per dollar, the lowest since April 1. Brazil’s tax increase on foreign loans and debt sales helped reduce by 88 percent the number of dollars that entered the country last month, according to central bank data published today.
The dollar dropped to the lowest in almost three years against the currencies of six major trade partners as the Institute for Supply Management’s index of non-manufacturing companies fell to 52.8 in April. The measure of the service industry, which accounts for about 90 percent of the economy, was 57.3 in March, and economists in a Bloomberg News survey forecast a reading of 57.5 this month.
“It postpones the day of reckoning for the Fed and the normalization of interest rates,” said Michael Woolfolk, senior currency strategist in New York at Bank of New York Mellon Corp., the world’s largest custodial bank, with more than $20 trillion in assets under administration. “It pushes rate hikes further into the future.”
IntercontinentalExchange Inc.’s Dollar Index, used to track the greenback against the euro, yen, pound and three other currencies, dropped as much as 0.6 percent to 72.696, the lowest level since July 2008. It later was at 73.116.
U.S. Employment
ADP Employer Services data showed employment at U.S. companies increased by 179,000 jobs in April, compared with a revised 207,000 in March. The median estimate in a Bloomberg News survey called for a 198,000 advance this month.
The ECB raised its benchmark interest rate to 1.25 percent on April 7 from a record low 1 percent. Some economists expect it to signal tomorrow another boost will come as soon as June.
Fed Chairman Ben S. Bernanke said last week after a policy meeting he was unsure when the U.S. central bank’s monetary stimulus will unwind. The benchmark U.S. rate has been zero to 0.25 percent since December 2008 to support the economy. The Fed’s program to spur growth by purchasing $600 billion in Treasuries will end in June, as planned, policy makers decided.
‘Anemic’ Economy
Boston Fed President Eric Rosengren said today in a speech in Boston that record stimulus is necessary to spur the “anemic” U.S. economy and that raising interest rates to combat increasing food and fuel prices would impede growth.
The euro rose earlier as a composite index of European services and manufacturing rose to 57.8 in April, led by factory output, a report showed.
Pacific Investment Management Co., which runs the world’s biggest mutual fund, said it’s betting the euro will fall because its current strength doesn’t adequately reflect the risk that the union may disintegrate.
The Newport Beach, California-based firm is buying currencies of countries that have strong growth, low levels of debt, and where central banks are tightening monetary policy, such as Australia, Singapore, South Korea and Sweden, Thomas Kressin, head of European foreign exchange at Pimco in Munich, said in an interview yesterday.
The yen gained the most today among 10 developed-nation currencies measured by the Bloomberg Correlation-Weighted Currency Indexes, rising 0.9 percent. New Zealand’s dollar lost 0.9 percent for the worst performance.
To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
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