Dollar Declines Against Most Major Peers as Stocks Gain

The dollar declined against most of its major counterparts as Asian stocks extended gains, reducing demand for haven assets.

The greenback weakened against the Australian dollar after China’s central bank pumped a record amount of money into the financial system this week, spurring speculation the nation will act to support growth. Demand for the euro was limited before Spanish Prime Minister Mariano Rajoy submits a fifth package of budget cuts as demonstrators gathered in Madrid yesterday.

“Chinese stocks are gaining amid speculation that China may announce stimulus measures,” reducing demand for haven assets such as the dollar, said Akira Moroga, manager of foreign-exchange product group at Aozora Bank Ltd. in Tokyo. “It mitigates some risks of a slowdown in China’s economy that has been causing risk aversion.”

The dollar traded at 77.70 yen at 7:19 a.m. in London from 77.75 yesterday, when it touched 77.59, the lowest since Sept. 14. The greenback lost 0.1 percent to $1.2888 per euro.

The yen slid 0.1 percent to 100.15 per euro. It gained for the past seven trading days, the longest winning streak since the eight days ended May 31. The Australian dollar advanced 0.4 percent to $1.0414.

The MSCI Asia Pacific Index (MXAP) of shares rallied 0.9 percent after earlier falling as much as 0.2 percent. The Shanghai Composite Index added 2.8 percent.

Chinese Stocks

China’s stocks climbed for the first time in three days. The People’s Bank of China injected a net 365 billion yuan ($57.9 billion) via reverse-repurchase operations and bill redemptions this week, the most since Bloomberg started compiling the data in 2008, compared with 101 billion yuan last week. The monetary authority offered 130 billion yuan of 28-day reverse repo agreements and 50 billion yuan of 14-day contracts today, according to a statement.

Gains in the euro were limited after Spanish bonds dropped yesterday, sending the yields on 10-year securities above 6 percent for the first time since Sept. 18. Catalan President Artur Mas called early elections for Nov. 25, as Rajoy struggles to gain acceptance for austerity measures and faces criticism from European leaders for delaying a decision on an international bailout for the nation.

The euro has weakened 3.2 percent this year, the worst performance after the yen among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar has weakened 2.6 percent.

“When you see austerity protests going on across Europe, that concerns the broader market and it certainly will make investors more cautious of taking a long euro position,” said Thomas Averill, managing director in Sydney at Rochford Capital, a currency and interest-rate risk management company.

A long is a bet that an asset will rise. Averill said he expects the euro to weaken to $1.26 in the next 10 days.

To contact the reporter on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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