Dollar Drops as Safety Bid Eases Before Chinese PMI Data

The U.S. dollar weakened versus most of its 16 major peers on speculation reports tomorrow will show improvement in Chinese manufacturing, brightening the global economic outlook and damping demand for haven assets.

The greenback remained lower after dropping yesterday against the yen as Asian stocks rose and U.S. capital markets prepared to reopen today after Atlantic storm Sandy swept through New York. Appetite for the euro was tempered before data that may show unemployment in Europe climbed to a record, adding to signs the debt crisis is hurting growth. The Australian and New Zealand currencies held gains after figures today showed better-than-expected building approvals.

“We should start to see now further evidence that we’ve had a bottom on the growth profile, and we should see an improvement in PMI,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp., referring to China’s economy and the nation’s manufacturing index. “It would probably be a negative for the U.S. dollar.”

The dollar bought 79.60 yen as of 6:38 a.m. in London after falling 0.2 percent yesterday. It fetched $1.2962 per euro following a 0.4 percent decline in New York, the biggest drop since Oct. 17. Europe’s shared currency was little changed at 103.18 yen after rising 0.2 percent yesterday.

The dollar has strengthened 2.1 percent against its Japanese counterpart this month. It has declined 0.8 percent versus the euro since Sept. 30.

The MSCI Asia Pacific Index (MXAP) of shares climbed 0.7 percent today.

China PMI

Figures due tomorrow may show a manufacturing gauge based on a survey of purchasing managers in China, the world’s second- biggest economy, climbed to 50.2 this month from 49.8 in September, according to the median estimate of economists surveyed by Bloomberg News.

A separate measure by HSBC Holdings Plc and Markit Economics probably rose to 49.1 in the same period from 47.9 last month, economists said in another poll before tomorrow’s release. That would confirm a preliminary reading released Oct. 24. For both indexes, 50 is the dividing line between contraction and expansion.

The dollar may be poised to drop further versus the yen should it breach the “target area” from 79 yen to 79.10, according to Barclays Plc.

“A break below this zone would prompt a revisit of the daily cloud base near 78.40,” technical analysts led by Jordan Kotick wrote in a note to clients yesterday, referring to the greenback’s Ichimoku chart, which is used to predict a currency’s direction by analyzing the midpoints of historical highs and lows.

Trading Resumes

U.S. equity markets will resume trading today, according to statements by NYSE Euronext, Nasdaq OMX Group Inc. and Bats Global Markets Inc. Fixed-income trading, halted at noon on Oct. 29, will also reopen, under a recommendation by the Securities Industry and Financial Markets Association.

The euro and dollar have declined 2.1 percent this year, the second-worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen posted the biggest drop, falling 5.8 percent in the same period.

The jobless rate in the euro area probably climbed to an all-time high of 11.5 percent in September, according to economists surveyed by Bloomberg before the European Union’s statistics office releases the data today.

Poor Growth

“Economic growth is going to be pretty poor and I think for that reason interest rates there are going to remain low,” Westpac’s Speizer said of the euro region’s economic outlook. “Slow growth, low interest rates -- you cannot get too excited about the euro currency. I think it will be an underperformer over the next year.”

The European Central Bank lowered the region’s key policy rate to a record 0.75 percent in July and has since kept it unchanged.

In Japan, data released today on a manufacturing purchasing managers’ index by Markit Economics indicated a contraction for a fifth-straight period in October. A preliminary report yesterday showed industrial production dropped last month by the most since March 2011, when the nation was struck by an earthquake and tsunami.

The Bank of Japan boosted its asset-purchase program by 11 trillion yen ($138 billion) to 66 trillion yen at a meeting yesterday. It also said it expects prices excluding fresh food to rise by 0.8 percent in the fiscal year that begins in April 2014, compared with a 1 percent target announced in February.

Easing Expectations

“Given the increasing downside risks to Japan’s growth, there still remain expectations for further monetary easing by the BOJ,” said Kikuko Takeda, a senior analyst in London at the Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s biggest financial group. “The yen is more likely to weaken.”

Australia’s statistics bureau said today the number of permits granted to build or renovate houses and apartments gained 7.8 percent in September from the previous month, exceeding economist estimates for a 1 percent advance.

Building approvals in New Zealand also increased 7.8 percent in the month, according to a separate report, the fastest pace since March.

Australia’s dollar added 0.1 percent to $1.0376. Its New Zealand counterpart gained 0.1 percent to 82.18 U.S. cents.

To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net

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

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