Dollar Strengthens Versus Euro as Stocks Fall; Pound, Krona DropLukanyo Mnyanda
The dollar strengthened, rising from near a seven-week low against the euro, as a decline in stocks boosted demand for the currency as a refuge.
The Canadian dollar fell against its U.S. counterpart before the central bank’s latest interest-rate decision. Britain’s pound slid to a one-month low against the euro after U.K. unemployment rose, while Sweden’s krona dropped after the Riksbank delayed increases to interest rates to the second half of 2014. The euro erased its advance against the yen as former policy maker Lorenzo Bini Smaghi said the European Central Bank needs to find ways to stop the currency’s appreciation.
“It’s a small bit of risk-off” supporting the U.S. currency, said Kathleen Brooks, research director in London at Forex.com, a unit of online currency-trading company Gain Capital Holdings Inc. “The closer we got to $1.32, profit taking was going to come in, which was going to thwart the potential for a sustained upward move” in the euro against its U.S. peer, she said.
The dollar appreciated 0.4 percent to $1.3128 per euro at 8:49 a.m. New York time, after sliding to $1.3202 yesterday, the weakest level since Feb. 25. It gained 0.4 percent to 97.96 yen. The euro was little changed at 128.60 yen, after earlier jumping by as much as 1 percent.
The Stoxx Europe 600 Index sank 1 percent, capping its longest losing streak since January. Futures on the Standard & Poor’s 500 Index slid 0.7 percent.
Canada’s so-called loonie fell 0.5 percent to C$1.0262 per U.S. dollar. One loonie bought 97.45 U.S. cents.
The rate on overnight loans between commercial banks will remain at 1 percent for the 21st consecutive meeting in a decision at 10 a.m. in Ottawa, according to all 23 economists surveyed by Bloomberg.
The statement, together with a quarterly economic forecast, will be followed by a press conference with Governor Mark Carney, who is due to replace Mervyn King as head of the Bank of England in July.
Sterling depreciated 0.3 percent to 86.06 pence per euro, after reaching 86.37 pence, the weakest level since March 15. It dropped 0.7 percent to $1.5251.
U.K. unemployment as measured by International Labour Organization methods rose by 70,000 to 2.56 million, the most since November 2011, the Office for National Statistics said today in London. Minutes of the Bank of England’s April meeting released today showed King pushed for additional stimulus for a third month before being outvoted.
Sweden’s krona slid 1 percent to 8.4655 per euro. It was 1.4 percent weaker at 6.4502 against the dollar.
The Riksbank kept the repo rate at 1 percent after cutting it four times since December 2011. The bank lowered its forecast for the rate to 0.9 percent for the first quarter next year from a previous assessment of 1.2 percent, and signaled increases are unlikely until the second half of 2014.
A stronger euro “is a challenge for the ECB,” Bini Smaghi told Tom Keene and Sara Eisen on Bloomberg Television’s “Surveillance.” “They need to do something,” he said.
Bini Smaghi “obviously was referring to the fact that price competitiveness is an issue in southern Europe,” said Shant Movsesian, a foreign-exchange strategist at 4Cast Ltd. in London. “It’s just the fact that he called for lower levels in the euro and off it came.”