Dollar Falls Versus Major Counterparts; Brazilian Real, Mexican Peso Climb

The dollar fell the most in more than a month against the euro as signs manufacturing is expanding in the U.S. and China damped the appeal of safer assets.

The greenback weakened versus all of its most-traded peers as a U.S. factory gauge indicated the fastest growth in six months. Manufacturing indexes for China and India also showed gains this week. The euro snapped a seven-day losing streak versus the yen, its longest since December 2010, after German unemployment fell. The Australian and New Zealand dollars advanced to their strongest since November.

“The data that came out today was pretty positive,” said Mary Nicola, a currency strategist at BNP Paribas SA in New York. “It helped boost risk sentiment.”

The dollar depreciated 0.9 percent to $1.3050 per euro at 5 p.m. in New York after dropping as much as 1.1 percent earlier in its biggest intraday decline since Nov. 30. The U.S. currency slipped 0.2 percent to 76.74 yen. The euro gained 0.7 percent to 100.14 yen after falling to 98.66 yesterday, the weakest level since December 2000.

The Standard & Poor’s 500 Index of stocks climbed 1.6 percent and the Thomson Reuters/Jefferies CRB Index of raw materials added 2.6 percent.

The greenback remained weaker after minutes released today of the Federal Reserve’s last policy meeting showed U.S. central bankers will for the first time make public their own forecasts for the benchmark interest rate at their Jan. 24-25 meeting.

U.S. Manufacturing

The Institute for Supply Management’s factory index (NAPMPMI) rose to 53.9 in December from 52.7 a month earlier, the Tempe, Arizona- based group’s data showed today. Fifty is the dividing line between growth and contraction, and economists surveyed by Bloomberg News projected the gauge would increase to 53.5.

“You get a good number like this and it continues” the trend, said Fabian Eliasson, head of U.S. currency sales at Mizuho Financial Group Inc. in New York. “The dollar is falling off, and it’s a little bit more risk-on.”

Brazil’s real gained the most against the dollar among its 16 major counterparts tracked by Bloomberg, adding 2.2 percent to 1.8307 per greenback. Mexico’s peso appreciated 2 percent to 13.6468 to the dollar.

China’s purchasing managers’ index for manufacturing increased to 50.3 last month from 49 in November, the logistics federation said Jan. 1. The reading exceeded all forecasts in a Bloomberg survey. India’s PMI for manufacturing rose to the highest in six months, HSBC Holdings Plc and Markit Economics said yesterday.

Dollar Index (DXY)

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, dropped 0.8 percent to 79.648.

The dollar has fallen 0.7 percent in the past week, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The greenback gained 1.1 percent last year, snapping two years of losses. The euro was the worst performer in 2011, sliding 2 percent.

U.S. employers added 150,000 jobs in December, compared with an increase of 120,000 in November, according to the median estimate of economists in a Bloomberg News survey. The Labor Department will report the data Jan. 6.

“There’s a somewhat more optimistic growth picture, and markets are just reacting to that,” said Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New York. “If we do get a jobs number above 150,000, it should be good for risk sentiment.”

Fed policy makers “decided to incorporate information about their projections of appropriate monetary policy” into their Summary of Economic Projections starting this month, minutes of their Dec. 13 meeting showed.

Rate Bets

The move is another effort toward greater transparency under Fed Chairman Ben S. Bernanke. By releasing their own forecasts, central bankers may alter expectations for the timing of the first increase in their benchmark rate, which has been kept near zero since December 2008.

The euro extended gains after Germany’s Federal Labor Agency said the number of people out of work last month slid a seasonally adjusted 22,000 to 2.89 million. Economists forecast a drop of 10,000, a Bloomberg survey showed.

The cost for European banks to borrow in dollars tumbled to the lowest level in almost two months, according to a money- markets indicator. The three-month cross-currency basis swap, the rate banks pay to convert euro interest payments into dollars, reached 1.04 percentage points below the euro interbank offered rate, the least expensive since Nov. 9 on an intraday basis, according to data compiled by Bloomberg. It closed yesterday at 1.14 percentage points below Euribor.

Canadian Dollar

Canada’s dollar may appreciate to a two-month high against its U.S. counterpart if it closes stronger than its 100-day moving average of C$1.0143, according to MacNeil Curry, head of foreign-exchange and interest-rates technical strategy at Bank of America Corp. in New York. Such a close may spur the currency to parity with the greenback, a level it hasn’t been at since Nov. 1. The currency gained 0.8 percent today to C$1.0104.

The Australian and New Zealand currencies climbed as equities rallied.

Australia’s dollar strengthened 1.4 percent to $1.0378 after climbing to as high as $1.0387, the strongest level since Nov. 9. The New Zealand dollar advanced 1.5 percent to 78.99 U.S. cents. It reached 79.08 cents, the most since Nov. 14.

Futures traders (.ECLRG) last week boosted bets the euro will weaken. The number of wagers made by hedge funds and other large speculators betting on a drop in the 17-nation currency increased to a record 127,879 contracts more than those anticipating a gain, according to the Washington-based Commodity Futures Trading Commission.

To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Keith Jenkins in London at kjenkins3@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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