The dollar rose against the euro and the yen as U.S. economic data indicated a strengthening recovery, undermining the case for more stimulus from the Federal Reserve.
The U.S. currency gained from the lowest level this month against its 17-nation European counterpart as reports showed home-prices declines slowed and consumer confidence this month stayed close to the highest level in a year. The Dollar Index advanced as Treasuries rose after the highest pre-auction yields since July spurred stronger-than-average demand at a government sale of $35 billion in two-year notes. The measure had dropped the past two days amid speculation the Fed will start a third round of quantitative easing, or QE3.
“The dollar is benefiting from generally upbeat assessment of the U.S. economy,” said Samarjit Shankar, a managing director for the foreign-exchange group in Boston at Bank of New York Mellon, the world’s largest custodial bank, with more than $26 trillion in assets under administration. “We’re gradually entering an investment regime where risk-on is not necessarily bad for the dollar. From a flow perspective, we’re still seeing the euro as one of the strongest net sold across the board.”
The dollar strengthened 0.3 percent to $1.3313 per euro at 5 p.m. New York time. It fell earlier to as low as $1.3386, the least since Feb. 29, when it reached $1.3486. The U.S. currency added 0.4 percent to 83.17 yen. The euro rose 0.1 percent to 110.75 yen, after gaining 1.6 percent during the past two days.
Norway’s krone and Australia’s dollar fell the most against the dollar among the 16 major currencies tracked by Bloomberg. The krone fell 0.5 percent to 5.7040 per dollar and the Aussie dropped 0.7 percent to $1.0460.
The Aussie fell to a two-month low last week as concern increased growth in China, Australia’s biggest trading partner, is slowing. Chinese industrial companies’ net income decreased 5.2 percent from a year earlier in the first two months of 2012, the nation’s statistics bureau said today. That compared with a 34.3 percent gain in the same period last year.
“These currencies, like the Aussie, just ran out of gas to some extent,” said Alan Ruskin, global head of Group-of-10 foreign-exchange strategy at Deutsche Bank AG in New York. “There’s a bit of skepticism vis-a-vis China and without China supporting commodities, it’s not easy to put on those trades.”
The pound may tumble against the dollar to depths not seen in more than a quarter century as it strengthens toward a level last surpassed nearly four years ago, Citigroup Inc. said.
Resistance from the 200-week moving average of $1.6014, coupled with a trend line dating back to 2007 and the currency pair’s February high, may stop the pound’s year-to-date gains and push it back to $1.3255, last hit in 1985, according to Jim Zhou, an analyst at the Citigroup Global Markets unit in New York.
The pound fell 0.1 percent to $1.5951.
The yen has depreciated 10.7 percent this year, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar has fallen 2.6 percent, and the euro has gained 0.4 percent.
“Investors shouldn’t take any one place as a safe haven,” Axel Merk, founder and president of the Palo Alto, California- based firm, said in a television interview on “Surveillance Midday” with Tom Keene. “You just can’t put all your money in any one place -- it is a race to the bottom and the major economies are racing faster than the smaller economies.”
The implied volatility for three-month euro-dollar options, which indicates expected swings in the underlying currencies, was fell 0.3 percent to 9.91 percent. It reached 9.83 percent, the least since August 2008. The JPMorgan G7 Volatility Index (JPMVXYG7) has tumbled to 9.95 percent from 12.34 percent on Jan. 2.
The franc rose against the euro after falling yesterday by the most since March 19. The Swiss currency had weakened Economy Minister Johann Schneider-Ammann said he would “generally like” the franc to weaken toward 1.35 or 1.40 versus the euro.
The Swiss National Bank said in September it would cap the franc at 1.20 per euro after it touched a euro-era record 1.00749 in August.
The franc rose 0.1 percent to 1.20540 per euro after falling by as much as 0.1 percent yesterday.
The dollar has weakened against 15 of its 16 major peers in 2012. Fed Chairman Ben S. Bernanke yesterday stoked speculation the central bank will embark on a third round of asset purchases, saying stimulative policy is still needed to reduce joblessness.
“Further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies,” he said in a speech in Arlington, Virginia.
“Bernanke indicated that the door is wide open to QE3,” said Ulrich Leuchtmann, head of currency strategy at Commerzbank AG in Frankfurt. “As long as the market think QE3 might happen, then that will be negative for the dollar. We have seen two spectacularly bad days for the dollar and now we are losing a bit of momentum.”
The Fed bought $2.3 trillion of securities in two rounds of quantitative easing from December 2008 to June 2011. The U.S. central bank has held its target interest rate at a range of zero to 0.25 percent since December 2008.
The S&P/Case-Shiller index of property values in 20 U.S. cities fell 3.8 percent from a year earlier, matching the median forecast of 32 economists surveyed by Bloomberg News, after decreasing 4.1 percent in December, a report from the group showed today in New York.
The Conference Board’s confidence index dropped to 70.2 from a revised 71.6 reading in February that was higher than initially reported, figures from the New York-based private research group showed today. The median forecast of economists surveyed by Bloomberg News called for a decrease to 70.
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