Dollar Advances Against Peers as U.S. Sales Rise; Aussie Slides

The dollar gained versus most of its major counterparts after a report showed U.S. retail sales unexpectedly increased in April, bolstering optimism in the world’s largest economy.

The euro fell for a third day versus the greenback before data this week forecast to show the currency bloc’s economy shrank for a sixth quarter. The shared currency advanced versus the yen. The dollar rose to the highest level since 2008 versus the yen amid bets the Federal Reserve will start to taper its monthly bond buying under its quantitative-easing stimulus. Australia’s dollar slid amid a drop in business confidence.

“We had better-than-expected retail-sales numbers from the U.S., and consumer spending appears to be doing better than expected amid headwinds,” Brian Daingerfield, a currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit in Stamford, Connecticut, said in a telephone interview. “Markets are very keen on stronger data in the U.S. potentially portending a stronger dollar if the Fed opts to taper purchases a bit early.”

The dollar climbed 0.7 percent against Australia’s currency at 5 p.m. New York time, to 99.52 cents per Aussie, and reached 99.41 cents, the strongest level since June 14. The U.S. currency strengthened 0.7 percent to 12.1649 Mexican pesos.

The greenback gained 0.1 percent to $1.2975 per euro, after climbing 0.4 percent earlier. It rose 0.2 percent to 101.85 yen and touched 102.15, its highest level since October 2008. The Japanese currency depreciated 0.1 percent versus the euro to 132.12 and reached 132.40, the weakest since January 2010.

Relative Strength

The yen approached a technical level that suggested it may soon strengthen. The currency’s 14-day relative strength index against the dollar declined to 29.6, below the 30 level some traders see as a signal an asset has fallen too far, too fast and may be due to reverse course.

The yen lost 6.6 percent over the past three months against nine developed-nation peers monitored by Bloomberg Correlation Weighted Indexes. The dollar gained 3.5 percent, while the euro added 0.2 percent.

The Australian dollar slid versus all of its 16 most-traded counterparts after National Australia Bank Ltd. said its index of business confidence in the nation fell to negative 2 in April, the lowest since November, from 2 in March. The Reserve Bank of Australia lowered interest rates to a record-low 2.75 percent on May 7.

‘Ferociously Uncompetitive’

“It’s all because they built up their commodity sector tremendously, the currency went way up,” John Taylor, founder and chief executive officer of the currency hedge-fund FX Concepts LLC, said in an interview on Bloomberg Television’s “Market Makers” with Erik Schatzker and Trish Regan. “The rest of the economy is ferociously uncompetitive.”

The Aussie dollar declined 0.5 percent to 101.34 yen.

New Zealand’s dollar, nicknamed the kiwi, lost 0.6 percent to 82.49 U.S. cents and touched 82.29, the weakest since March 21. It depreciated 0.4 percent to 84 yen.

The Brazilian real climbed against all of its most-traded peers as traders bet the central bank will intervene to stem the currency’s losses. Central-bank President Alexandre Tombini said in a May 10 interview with Globo television that policy makers will do whatever is needed to slow inflation.

The real appreciated 0.6 percent to 2.0080 per dollar and increased 0.8 percent to 2.6054 per euro.

Israel’s shekel dropped versus all 31 of its most-traded counterparts after the central bank unexpectedly cut its benchmark interest rate to a three-year low and announced a program to purchase foreign currency to limit gains in the currency. The shekel lost 1.2 percent to 3.6139 per dollar.

U.S. Sales

U.S. retail sales increased 0.1 percent, following a 0.5 percent drop in March, Commerce Department figures showed today in Washington. The median forecast of 81 economists surveyed by Bloomberg called for a 0.3 percent drop. Figures used to calculate growth, which exclude categories such as automobiles, also advanced.

Fed Bank of Philadelphia President Charles Plosser said on May 9 U.S. unemployment will probably fall to 7 percent at the end of 2013 and he would favor reducing the Fed’s $85 billion monthly pace of bond-buying next month. The jobless rate was 7.5 percent last month. The Fed buys bonds to put downward pressure on borrowing costs.

Plosser’s remarks highlighted a debate within the Federal Open Market Committee on whether to expand or curb the pace of asset purchases that pumped up the central bank’s balance sheet to $3.32 trillion.

Yen Bets

Futures traders increased their wagers that the yen will decline against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission showed last week. The difference in the number of wagers by hedge funds and other large speculators on a decline in the yen compared with those on an increase -- so-called net shorts -- was 78,560 on May 7, compared with net shorts of 71,127 a week earlier.

Trading in over-the-counter foreign-exchange options totaled $33 billion as of 5:08 p.m., compared with $53 billion on May 10, 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 $12 billion, the largest share of trades at 36 percent. Australian dollar-U.S. dollar options were the second most actively traded at $4.5 billion, or 14 percent.

Dollar-yen options trading was 4 percent above the average for the past five Mondays at a similar time in the day, according to Bloomberg analysis.

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