The Swiss franc strengthened against higher-yielding currencies as oil prices rose above $100 a barrel for a second day amid unrest in North Africa and the Middle East, fueling demand for the currency as a haven.
The euro rose versus the dollar and yen after a report showed European producer-price inflation accelerated more than economists estimated in January. The dollar extended gains versus the yen after companies hired more workers last month than forecast. The franc also advanced against the yen and the Australian dollar. Libyan rebels braced for renewed clashes with forces loyal to leader Muammar Qaddafi and Al Arabiya television reported Iranian protesters fought with security forces.
“The Swiss franc has been supported by demand for safety,” said Derek Halpenny, European head of currency research at Bank of Tokyo-Mitsubishi UFJ Ltd, in London. “If there was any pronounced escalation in risk aversion, you’d see the dollar perform very well.”
The Swiss franc strengthened 0.3 percent to 92.61 centimes per dollar at 8:27 a.m. in New York, and 0.4 percent to 88.55 yen. The euro gained 0.3 percent to $1.3818 and appreciated 0.6 percent against the Japanese currency to 113.342 yen. The dollar rose 0.2 percent to 82.03 yen, from 81.86 yen yesterday.
New Zealand’s dollar, nicknamed the kiwi, fell to the lowest level this year after Prime Minister John Key said he expected a cut in the nation’s benchmark rate.
The kiwi slid 0.9 percent to 74.08 U.S. cents after earlier touching 73.84 cents, the least since Dec. 20.
Factory-gate prices in the euro region jumped 6.1 percent from a year earlier, after increasing 5.3 percent in December, the European Union’s statistics office in Luxembourg said today. That’s the fastest since September 2008 and more than the 5.7 percent gain forecast by economists before the report.
European stocks dropped for a second day, with the Stoxx 600 Index retreating by 0.7 percent. The measure has declined 2.7 percent since Feb. 17, when it reached a 2 1/2-year high. The MSCI World Index of shares declined 0.6 percent. Crude oil climbed as much as 1 percent to $100.64 a barrel in New York.
The euro has risen against 13 of its 16 most-traded counterparts this year as traders raise bets the ECB will increase its key rates. European policy makers have kept the benchmark at a record low of 1 percent since May 2009.
“The market is more interested in whether the ECB ends up talking tough and raising rates like the market has priced in,” said Tony Allen, global head of currency trading in Sydney at Australia & New Zealand Banking Group Ltd., Australia’s third-largest lender by market capitalization. The euro may find buyers near the $1.3750 level and “drift back up,” he said.
Libya, Oman, Yemen
Qaddafi is attempting to regain control of major cities after the U.S. and European nations began planning for a no-fly zone over Libya. Oman deployed armored vehicles in the city of Sohar after protests on Feb. 28 while Yemeni demonstrators again took to the streets of Sana’a, the capital, to demand the ouster of President Ali Abdullah Saleh.
Companies in the U.S. added 217,000 workers in February, according to figures today from ADP Employer Services.
The dollar benefits as the world’s principal reserve currency. The yen typically strengthens in times of political, financial and economic turmoil. Japan’s trade surplus makes the currency attractive because it means the nation doesn’t have to rely on overseas lenders.
“The dollar hasn’t lost its safe-haven status and that’s what we’re seeing here,” said Elsa Lignos, a currency strategist in London at Royal Bank of Canada’s RBC Capital Markets. “If we move into a situation where unrest becomes a bigger issue, we think risk becomes the dominant driver and that should support the dollar.”
Cut ‘Priced In’
New Zealand’s currency depreciated against all of its 16 major counterparts as traders increased bets for rate reductions by the Reserve Bank of New Zealand.
“The market has priced in a cut from the Reserve Bank,” Key said in an interview today in Wellington. “That would probably be my expectation, that the Reserve Bank would cut.”
The nation is grappling with the human and financial toll of a 6.3-magnitude earthquake on Feb. 22 that struck the South Island city of Christchurch. It was the city’s second major temblor in six months and wrecked the central business district. Both quakes may have caused as much as NZ$20 billion ($15 billion) worth of damage, Key said this week.
“There have been rumors and talk of a rate cut,” said Mitul Kotecha, Hong Kong-based head of global foreign-exchange strategy at Credit Agricole SA, a unit of France’s second-largest lender by total assets. The comments provided “a more negative bias for the New Zealand dollar,” he said.
Swaps traders are certain New Zealand’s central bank will cut its benchmark by 25 basis points at its meeting on March 10, with some betting on a 50-basis point reduction, according to a Credit Suisse Group AG index.