The dollar pared its first weekly gain in three weeks against a basket of peers on concern the spread of the Ebola virus may weigh on the economy before the Federal Reserve’s policy meeting.
The yen halted a six-day drop against the dollar after a doctor tested positive for the disease in New York, boosting haven demand. The Bloomberg Dollar Spot Index slipped from almost its highest in more than two weeks as the Fed prepares to meet Oct. 28-29. The euro rallied as a draft report indicated four of five euro-area banks are set to pass a European Central Bank stress test. Brazil’s real soared.
“Every new shock creates a panic for a few days and then it subsides,” Greg Anderson, head of global foreign-exchange strategy in New York at Bank of Montreal, said in a phone interview. “I don’t expect to see a lot further dollar appreciation this year, but I think this is a real good sign of what’s going to happen next year -- a major dollar rally, reminiscent of the late 90s.”
The Bloomberg Dollar Spot Index, which measures the greenback against 10 major peers, lost 0.2 percent to 1,068.16 as of 5 p.m. New York time, paring the gauge’s first weekly gain since the period ending Oct. 3 to 0.4 percent. The measure touched 1,070.57 yesterday, the highest since Oct. 7.
The yen strengthened 0.1 percent to 108.16 per dollar after depreciating to 108.35 yesterday, the weakest level since Oct. 8. Japan’s currency slipped 0.1 percent to 137.04 per euro. The dollar fell 0.2 percent to $1.2671 per euro.
The dollar soared from 1997 to 1999 amid the dot-com boom, gaining against all but the yen among 16 major peers, adding 5.6 percent versus the pound, 17 percent against the Australian dollar and 42 percent versus Brazil’s real.
Hedge funds and other large speculators trimmed bets on the dollar versus eight of its major peers from a record high this week. The difference in the number of wagers on a gain compared with those on a drop -- net longs -- was 329,955 on Oct. 21, from 331,464 a week earlier, according to data from the Washington-based Commodity Futures Trading Commission.
Russia’s ruble led losses versus the dollar on the week, dropping 2.8 percent to push its plunge this year to 23 percent. South Africa’s rand added 1.4 percent to pace gainers.
The real led gains today, advancing 1.1 percent, as a poll on this weekend’s presidential election putting Aecio Neves ahead of incumbent Dilma Rousseff revived speculation that a new government will restore economic growth.
The euro rose for the first time in four days as a draft communique showed 105 banks are on track to pass the ECB’s bank health check, with 25 failing. The final results are published on Oct. 26.
The dollar dropped versus the yen as the International Monetary Fund this week cut its forecast for economic growth in sub-Saharan Africa this year to 5 percent from 5.5 percent, due in part to “economic spillovers starting to materialize” from the Ebola outbreak.
Ebola has infected almost 10,000 people this year, mostly in Sierra Leone, Guinea and Liberia, killing about 4,900. The ill New York doctor had recently returned from aid work in Guinea.
“The Ebola situation certainly doesn’t help and that certainly explains the yen’s rebound,” said Joe Manimbo, a market analyst in Washington at Western Union Business Solutions, a unit of Western Union Co. “But overall the market is just positioning cautiously ahead of the Fed decision next week.”
The dollar rose against most of its peers this week after a consumer price index added more than expected, moving the Fed closer to its target of 2 percent inflation.
New home sales in the U.S. rose 0.2 percent to a 467,000 annualized pace from a 466,000 rate in August that was 7.5 percent weaker than previously estimated, Commerce Department data showed today in Washington. The median forecast of 75 economists surveyed by Bloomberg called for the pace to decelerate to 470,000.
The central bank meets next week to consider monetary policy, which has seen rates held at zero to 0.25 percent since 2008. The Fed is expected to end its stimulatory program of bond purchases, known as quantitative easing, this month.
“We saw a little bit of a pullback in the dollar and a little bit of a reduction in risk appetite as a result of the Ebola story,” Omer Esiner, chief market analyst at the currency brokerage Commonwealth Foreign Exchange Inc. in Washington, said in a phone interview. “Next week we’re going to likely shift our focus back on to more fundamental stories, with the Fed probably going to headline next week’s economic calendar.”