Dollar Declines Against Peers Before Fed Speech; Yen Pares Gains
The dollar declined against the euro, snapping a three-day gain, ahead of a speech by a Federal Reserve official who may reiterate the case to maintain monetary stimulus.
The Dollar Index fell before Fed Reserve Vice Chairman Janet Yellen speaks in Washington today. The yen trimmed gains after Haruhiko Kuroda, a potential candidate to head the Bank of Japan, said additional monetary easing can be justified for 2013. The BOJ holds a policy meeting this week. The Australian dollar weakened after data showed home-loan approvals slid.
“Yellen is one of the doves in the Fed committee,” said Alvin Pontoh, Asia-Pacific strategist at TD Securities Inc. in Singapore. “If she says anything, it’s likely to be dovish and maybe because of that, we’re seeing a bit of euro strength against the dollar.”
The dollar weakened 0.1 percent to $1.3379 per euro at 7:29 a.m. in London, after gaining 1.6 percent in the past three sessions. The greenback slid 0.1 percent to 92.55 yen from the end of last week.
The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trade partners, slid 0.1 percent to 80.172. The Japanese currency traded at 123.83 per euro, after climbing 2.6 percent in the past three sessions to 123.87.
The Federal Open Market Committee last month linked its policy to economic indicators for the first time, saying it will keep rates low as long as the unemployment rate is above 6.5 percent and the outlook for inflation is no more than 2.5 percent.
The Fed previously said it will maintain low rates through at least mid-2015. Yellen is considered a likely successor to Chairman Ben S. Bernanke when his term ends in a year. Kansas City Fed President Esther George is due to speak on the U.S. Economy at the University of Nebraska-Omaha tomorrow.
Gains in the euro were limited on signs the region’s economy is slowing amid political uncertainty in Italy and Spain.
Industrial production in France, Europe’s second-largest economy, probably declined 0.2 percent in December from the previous month, when it rose 0.5 percent, according to the median estimate of economists surveyed by Bloomberg News before the statistics office releases data today.
European finance chiefs meet in Brussels today to discuss aid to Cyprus and Greece as a tightening election contest in Italy and corruption allegations in Spain disrupt market calm.
Spanish Prime Minister Mariano Rajoy has faced calls to resign after newspaper reports alleged he accepted illegal cash payments, and opinion polls have shown former Italy Premier Silvio Berlusconi closing the gap on front-runner Pier Luigi Bersani ahead of elections on Feb. 24-25.
Kuroda, president of the Asian Development Bank, said in an interview in Tokyo today the BOJ has “many” policy tools to achieve its 2 percent inflation target. Credit Suisse Group AG Chief Japan Economist Hiromichi Shirakawa has said Kuroda is “the leading candidate” to succeed Shirakawa.
The yen rallied at the end of last week following comments by Japanese Finance Minister Taro Aso that the pace of the currency’s decline was too fast.
“Positioning in the yen got too stretched, and it looks as though it needs a little bit of a correction before it can proceed lower,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp. “We’re going to have mixed rhetoric from the politicians, which has given the yen quite a lot of volatility.”
The Australian dollar traded near the lowest since October. The statistics bureau said in Sydney today the number of loans granted to build or buy houses and apartments declined 1.5 percent in December from the previous month when they fell a revised 0.7 percent.
“Today’s data is quite soft,” National Australia Bank Ltd. economist Spiros Papadopoulos wrote in a note today. “Further gains in house prices will be hard to come by in coming months, and also confirms to us that further interest- rate cuts will be required to boost overall housing activity.”
Reserve Bank of Australia Governor Glenn Stevens and his board kept the overnight cash rate target at 3 percent on Feb. 5. Stevens said the inflation outlook “would afford scope to ease policy further.”
The Aussie declined 0.3 percent to $1.0293 after completing four weeks of declines. It touched $1.0256 last week, the lowest since Oct. 23. New Zealand’s dollar depreciated 0.3 percent to 83.31 U.S. cents.
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