Dollar Weakens as Obama Signals Syria Strike Delay
The dollar fell to a three-week low as the U.S. delayed a congressional vote on military action to consider a United Nations plan to secure Syria’s chemical weapons, diminishing demand for haven assets.
The pound rose to the strongest level since January against the euro as the U.K. unemployment rate moved a step closer to the 7 percent threshold at which Bank of England Governor Mark Carney has said officials will reassess their policy stance. Australia’s dollar touched its highest versus the U.S. currency since June before a government report tomorrow that economists said will show the nation’s jobless rate increased in August.
“We know that the de-escalation of the Syria crisis is having an effect on markets,” Michael Woolfolk, a global-markets strategist at Bank of New York Mellon, said in a phone interview. “From that point of view, it appears that the safe-haven bid is starting to wear off and is prompting players to move back out of the dollar.”
The Bloomberg U.S. Dollar Index, which measures the greenback against 10 major peers, fell 0.4 percent to 1,024.01 at 5 p.m. in New York, touching the weakest level since Aug. 21. The U.S. currency fell 0.3 percent to $1.3311 per euro and dropped 0.5 percent to 99.89 per yen.
The pound gained 0.2 percent to 84.16 pence per euro after reaching 83.83 pence, the strongest level since Jan. 23. The U.K. currency rose 0.5 percent to $1.5818 after touching $1.5827, the highest since Feb. 8.
The yen may fall to the weakest versus the dollar in almost four months if a support level fails to hold, according to Credit Suisse Group AG.
“With a triangle-continuation pattern in place, we stay bullish” on the dollar against the yen, David Sneddon, global head of technical analysis in London at Credit Suisse, wrote today in a note to clients.
New Zealand’s dollar added 0.2 percent to 80.81 U.S. cents, touching the strongest since Aug. 19. The kiwi slid 0.3 percent to 80.72 yen.
The Reserve Bank of New Zealand left the official cash rate at record low 2.50 percent.
“Rate increases will likely be required next year,” Reserve Bank of New Zealand Governor Graeme Wheeler said in a statement in Wellington today. At the same time, restrictions on low-deposit home lending will mean rates rising less than they otherwise would have, and “we expect to keep the cash rate unchanged in 2013,” Wheeler said.
South Africa’s rand advanced to its strongest level in four weeks against the dollar. It traded 1.1 percent stronger at 9.8704 per dollar after appreciating to the strongest since Aug. 12.
Federal Reserve Bank of New York President William C. Dudley speaks tomorrow amid forecasts U.S. policy makers are moving closer to slowing bond purchases.
Dudley said in July that economic growth will probably quicken next year, possibly warranting a reduction in bond purchases. The Fed is forecast to slow its monthly buying to $75 billion from the current $85 billion pace at its Sept. 17-18 meeting, according to the median estimate of economists surveyed by Bloomberg News on Sept. 6.
“There’s definitely some consolidation going on,” said Kasper Kirkegaard, a senior currency strategist at Danske Bank A/S (DANSKE) in Copenhagen. “We have to wait until the Fed’s meeting next week for the next real catalyst.”
The yen has depreciated 11.3 percent this year, according to Bloomberg Correlation-Weighted Indexes. The dollar is up 3.8 percent and the euro has gained 4.8 percent.
Australia’s dollar gained 0.2 percent to 93.29 U.S. cents after touching 93.37.
The nation’s jobless rate rose to a four-year high of 5.8 percent last month, from 5.7 percent in July, according to the median estimate of 28 economists surveyed by Bloomberg before tomorrow’s report.
BOE officials introduced forward guidance last month and said they won’t raise their key interest rate until joblessness falls to 7 percent. While they don’t see that happening until late 2016, recent signs of strength in the economy have prompted investors to bet on an increase before then. Carney and three other members of the Monetary Policy Committee will testify on their guidance framework in Parliament tomorrow.
The U.K. “is starting to exit slowly from a fairly poor growth profile and it continues to surprise on the top side,” Sebastien Galy, a senior currency strategist at Societe Generale SA in New York, said in a telephone interview. “It’s definitely going in the right direction, and it’s also being helped by the euro zone, which is starting to outperform.”
Trading in over-the-counter foreign-exchange options totaled $25.5 billion, compared with $22.7 billion yesterday, according to data reported by U.S. banks to the Depository Trust Clearing Corp. and tracked by Bloomberg. Volume in options on the dollar-yen exchange rate amounted to $6.7 billion, the largest share of trades at 26 percent. Options on the greenback-yuan rate totaled $4.6 billion, or 18 percent.
Dollar-yen options trading was 44 percent more than the average for the past five Wednesdays at a similar time in the day, according to Bloomberg analysis. U.S. currency versus yuan options trading was about 400 percent more than average.
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