Dollar Falls as Stocks, Commodities Rise; Yen Gains on Exports

The dollar dropped against all of its major counterparts as equities rallied on better than expected corporate earnings and commodities advanced, reducing demand for a refuge.

The yen approached a record high versus the dollar after Japan’s exports rose in September more than forecast. The 17- nation euro advanced versus the dollar as European politicians attempted to craft an effective response to the region’s sovereign debt crisis. South Africa’s rand and Australia’s dollar climbed after a preliminary survey showed Chinese manufacturing may be the highest in five months.

“Caterpillar smashing street expectations had a significant impact on broader equity market sentiment,” said Ray Attrill, a senior currency strategist at BNP Paribas SA in New York. “There’s also a little bit less concern that China might be slowing dramatically.”

The yen increased 0.3 percent to 76.10 versus the dollar at 5 p.m. in New York after reaching a post-World War II record high of 75.82 on Oct. 21. The euro appreciated 0.2 percent to $1.3929 after earlier dropping 0.5 percent. The euro was little changed at 106 versus the yen.

Australia’s dollar rose 1 percent to $1.0475 as the Standard & Poor’s 500 Index rose 1.3 percent, gaining for a third consecutive day. Earnings at Caterpillar Inc., the largest construction and mining-equipment maker, beat analyst estimates.

Commodities Rally

The S&P GSCI Index of 24 raw materials rallied 2.4 percent after a report showed China’s manufacturing may expand in October for the first time in four months, snapping the longest contraction since 2009.

South Africa’s rand climbed 2 percent to 7.8790 per dollar and Mexico’s peso advanced 2.2 percent to 13.3708 as investors sought riskier investments.

Taiwan’s dollar rallied the most in a week, rising as much as 0.7 percent to 30.065 versus the U.S. currency as a government report showed the island’s unemployment rate fell to a three-year low of 4.27 percent in September.

The euro rose versus the dollar after European leaders meeting in Brussels yesterday outlined plans to assist banks, heading toward a revamped strategy to resolve the debt crisis.

The 13th summit in 21 months excluded a forced restructuring of Greece’s debt, keeping with the policy of encouraging bondholders to accept “voluntary” losses to help restore the country’s finances. Leaders will meet again Oct. 26.

‘In Limbo’

“We’re in limbo -- they’re not going to come up with a plan until Wednesday,” Kit Juckes, head of foreign-exchange research at Societe Generale SA in London, said in an interview on Bloomberg Television’s “Surveillance Midday” with Tom Keene. “There’s enough money, but you don’t need enough, you need twice, three times enough. Find $2 trillion so that you can restore confidence.”

A euro-area composite index based on a survey of purchasing managers in service and manufacturing industries fell to 47.2 in October from 49.1, London-based Markit Economics said today. That’s the lowest level since July 2009 and below a reading of 48.8 forecast by economists, according to a Bloomberg survey.

Investors expect a reduction of 25 basis points, or 0.25 percentage point, in the European Central Bank’s 1.5 percent target lending rate within the next 12 months, according to a Credit Suisse Group AG index.

Options traders are becoming less bearish on the euro. They are paying 3.28 percentage points more for the right to sell the common currency against the dollar than they are to buy it. The so-called one-month 25-delta risk reversal rate has narrowed from a closing-price record 4.03 on Sept. 6.

Franc Outlook

Futures traders have reversed their bets that the Swiss franc will gain against the dollar, according to Commodity Futures Trading Commission data. The difference in the number of wagers by hedge funds and other large speculators on a decline in the franc compared with those on a gain -- net shorts -- was 2,243 on Oct. 18, compared with net longs of 13 a week earlier.

The franc appreciated 0.2 percent to 88.08 centimes versus the dollar after earlier dropping 0.6 percent. The Swiss currency was little changed at 1.2270 versus the euro.

The yen rose versus the dollar as Japan’s exports increased 2.4 percent in September from a year earlier as demand for cars and auto parts advanced. The median estimate of 26 economists surveyed by Bloomberg News was for a 1 percent gain.

Japanese Finance Minister Jun Azumi and Chief Cabinet Secretary Osamu Fujimura signaled today Japan is ready to intervene in the currency market to stop a yen appreciation to post-World War II highs that may stunt shipments as overseas demand slows.

“The yen’s level is now getting into extreme territory where clearly for the carmakers, it’s a huge problem,” Jens Nordvig, a managing director of currency research at Nomura Holdings Inc. in New York, said in a radio interview today on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt.

To contact the reporters on this story: Allison Bennett in New York at abennett23@bloomberg.net; 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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