A dollar gauge snapped three days of gains after Russian and Ukrainian leaders agreed in talks on steps toward a cease-fire in eastern Ukraine, helping ease tensions that have stoked demand for the safest assets.
The Russian ruble advanced against all of its 31 major peers, while the Bloomberg Dollar Spot Index fell from a seven-month high before the U.S. issues an employment report Sept. 5. The European Central Bank meets tomorrow amid speculation it will add monetary stimulus.
“Headlines about a Russia-Ukraine cease-fire are definitely positive for the euro,” said Masafumi Takada, a New York-based director at BNP Paribas SA. “Also, the market has been accumulating long U.S.-dollar positions lately, and there’s some position-adjustment liquidation ahead of the ECB tomorrow and nonfarm payrolls on Friday.” Long positions are bets a currency will rise.
The Bloomberg Dollar Spot Index fell 0.2 percent to 1,031.79 at 5 p.m. New York time, after rising 0.7 percent in the past three days and touching 1,035.06, the highest level since Jan. 23.
The euro advanced as much as 0.2 percent to $1.3160 before trading at $1.3150, up 0.1 percent. It dropped yesterday to $1.3110, the lowest level since Sept. 6, 2013. The shared currency fell 0.2 percent to 137.80 yen. Japan’s currency gained 0.3 percent to 104.79 per dollar after depreciating earlier to 105.31, the weakest since Jan. 10.
JPMorgan Chase & Co.’s Global FX Volatility Index declined to 6.3 percent after climbing yesterday to 6.5 percent, the highest level since June 4 and up from an all-time closing low on of 5.29 percent on July 3. The average over the past year is 7.4 percent.
The yen will weaken as Japan’s public pension pool, the world’s biggest retirement fund, moves to become more competitive, said Takatoshi Ito, who led a panel advising the government on overhauling the system.
The Government Pension Investment Fund, which invested 55 percent of its 126.6 trillion yen ($1.2 trillion) in assets under management in Japanese bonds as of March, may buy more equities after a strategy review, Ito said at a conference in Bretton Woods, New Hampshire.
Brazil’s real reached the strongest level in more than a month on speculation support is growing for opposition candidate Marina Silva in a runoff election against President Dilma Rousseff. Bets that Rousseff will lose amid a faltering economy have helped push the real up 5.6 percent in 2014.
“The market is betting on a change of government as a positive thing,” Reginaldo Galhardo, a foreign-exchange manager at Treviso Corretora de Cambio in Sao Paulo, said in a telephone interview.
The Brazilian currency advanced 0.3 percent to 2.2369 per U.S. dollar and touched 2.2269, the strongest since July 29.
The Canadian dollar rose the most in a week after the Bank of Canada noted a jump in exports even as it left its benchmark interest rate unchanged at 1 percent, saying foreign trade must be sustained to trigger broader economic growth.
“It’s more optimistic,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada, by phone from Toronto. “It continues to cite risks globally, but it’s tacitly more optimistic on the Canadian economy.”
Canada’s currency gained as much as 0.5 percent, the most since Aug. 27, to C$1.0871 per U.S. dollar before trading at C$1.0888, up 0.4 percent.
Russia’s ruble appreciated 1.6 percent to 36.85 per dollar.
The Russian president, Vladimir Putin, outlined a peace plan for eastern Ukraine after agreeing with his Ukrainian counterpart Petro Poroshenko on steps toward a cease-fire in the conflict that has raged for more than five months.
The two men agreed on what to do for a truce between Ukraine’s army and pro-Russian separatists to come into effect.
U.S. President Barack Obama, in Estonia today to reassure eastern European NATO members of their security before heading to the alliance’s summit in the U.K., expressed skepticism.
Dmitry Peskov, Putin’s spokesman, denied Poroshenko’s earlier assertion that the leaders agreed on a permanent cease-fire, saying Russia can’t reach such an accord as it’s not a party to the conflict.
“The overall picture is that there’s going be either a cease-fire or working toward that, and that has helped the euro a little bit,” Sireen Harajli, a Mizuho Bank Ltd. strategist in New York, said in a phone interview. “For the dollar, I think it’s really just caution ahead of the payrolls number on Friday. Overall the trend of a stronger dollar is not over.”
The U.S. economy kept growing in July and August, with consumer spending in most places increasing at a “slight to moderate” pace, according to the Federal Reserve’s Beige Book. No region experienced a “distinct shift” in the pace of growth, according to the business survey, which is based on reports from the Fed’s 12 regional banks.
The Labor Department will report Sept. 5 that payrolls rose by more than 200,000 in August for a seventh-straight month, according to economists surveyed by Bloomberg.
The ECB meets tomorrow as the euro region’s economy slumps. The bank will embark on purchasing bonds under the quantitative-easing stimulus this year or next, according to 44 percent of respondents in a Bloomberg survey last month.