The yen and the Swiss franc weakened as stocks climbed after President Barack Obama said al-Qaeda leader Osama bin Laden was killed by U.S. operatives, damping demand for the safest assets.
The U.S. Dollar Index snapped a nine-day decline and Canada’s dollar slid after Brent crude oil dropped the most in almost seven weeks following reports of bin Laden’s death. The euro strengthened versus the U.S. currency and the krona appreciated after reports showed manufacturing in the euro region and Sweden is picking up.
“We’ve seen two weeks in a row of dollar down and Swiss up, so one day of turn-around is not necessarily a change in trend, but a consolidation of Swiss gains,” said Jon Wetreich, a currency strategist at Brown Brothers Harriman & Co. in New York. “We’ve got oil down, so to a certain degree that’ll have an effect on a couple of commodity currencies.”
The yen depreciated 0.5 percent to 120.87 per euro at 8:59 a.m. in New York and slid 0.3 percent to 81.43 per U.S. dollar. The euro advanced 0.2 percent to $1.4843 and climbed 0.4 percent to 1.2865 against the Swiss franc.
The Stoxx Europe 600 Index rose 0.3 percent and futures on the Standard & Poor’s 500 Index increased 0.6 percent. The yield on the 10-year Treasury note increased for the first time in three days.
The franc weakened versus a majority of its most-traded peers and the yen snapped two-day gains versus the euro and the dollar after Obama said bin Laden was killed by a team of U.S. operatives after a firefight at a house in Pakistan.
Bin Laden was the architect of a radical Islamist movement that killed almost 3,000 people in the U.S. on Sept. 11, 2001, and recast global security and politics.
Brent crude for June settlement slid as much as 3.4 percent to $121.67 a barrel, the biggest intraday drop since March 15, on speculation that bin Laden’s death may ease the risk of Middle East supply disruptions.
IntercontinentalExchange Inc.’s Dollar Index, which tracks the greenback against the currencies of six U.S. trading partners including the euro, yen and pound, rose as much as 0.5 percent before trading 0.1 percent higher at 72.991.
“There was some initial kneejerk dollar buying with the euphoria of it all,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. “The basic story for the dollar is that it’s paralyzed by low interest rates and bad fiscal health. Whether Osama Bin Laden is dead or alive is not going to change that story at all.”
The Dollar Index earlier reached its lowest level since July 2008. It had its biggest monthly decrease since September in April as a slowing U.S. economy encouraged the Federal Reserve to maintain stimulus.
The Canadian dollar slipped 0.4 percent to 94.87 U.S. cents. Crude oil is Canada’s biggest export.
Canadians vote in a federal election today. While Prime Minister Stephen Harper’s governing Conservatives were leading in recent polls, they probably lack enough support to convert their minority government into a majority of parliamentary seats. Conservative support has flattened in the past week, while the left-wing New Democrats have pushed the Liberal Party into third place in voter surveys.
Euro Area Manufacturing
The euro strengthened after a gauge of manufacturing in the 17-nation euro area rose to 58 from 57.5 in March, according to London-based Markit Economics. That’s above an initial estimate of 57.7 on April 19. A reading above 50 indicates growth.
Europe’s emergency aid packages have put Greece and Ireland on the right track and prevented the region’s debt crisis from spreading to Spain, European Union Economic and Monetary Commissioner Olli Rehn said at a conference in Brussels today.
“The aim of our strategy has been first of all to prevent a repeat cardiac arrest in the financial markets,” Rehn said. “We have done that.”
Sweden’s krona appreciated 0.2 percent to 8.9280 per euro and strengthened 0.4 percent to 6.0165 against the dollar. An index based on responses from around 200 manufacturers’ purchasing managers was 59.8 for April, according to Stockholm-based Swedbank AB, up from 58.6 in March. A reading above 50 signals expansion.
In the U.S., the Institute for Supply Management will probably say today its factory index slipped to 59.5 last month from 61.2 in March, according to a Bloomberg survey.
The difference in the number of wagers by hedge funds and other speculators on a decline in the dollar against a range of currencies compared with those on a gain rose to 357,410 on April 26 from 339,796 a week earlier, approaching the record 398,594 set in March, figures released by the Washington-based Commodity Futures Trading Commission on April 29 showed.
A widening interest-rate gap between America and the rest of the world may mean no rebound this year for the dollar, the world’s worst-performing major currency in the past three months. The Fed’s U.S. Trade-Weighted Major Currency Dollar Index fell to a record low last month after policy makers in Australia, Canada and the European Central Bank raised rates to damp inflation. Even after the drop, strategists from Barclays Plc and Morgan Stanley are cutting forecasts for the greenback.
While a weaker dollar may signal waning confidence in the U.S., it may help President Obama reach his goal of doubling exports by 2015 and reducing unemployment.