Dollar Falls to Lowest in a Week on Fed; Real Jumps

The dollar fell to the lowest in more than a week as Federal Reserve Bank of New York President William C. Dudley said he’s “getting more hopeful” about the economy while indicating no change in bond buying anytime soon.

India’s rupee and Brazil’s real led gains among emerging-market currencies as Asian and European equities strengthened after China vowed to carry out the broadest expansion of economic freedom since at least the 1990s. The dollar dropped last week after Fed Chairman-nominee Janet Yellen said monetary stimulus was still needed to spur growth.

“The market is risk-on today, so there’s no need to hold U.S. dollar,” Charles St-Arnaud, a foreign-exchange strategist at Nomura Holdings Inc. in New York, said in a phone interview. “The appointment of Yellen as chairwoman of the Fed has created a lot of expectations that tapering will most likely be delayed, as she’s a dovish person.”

Bloomberg’s U.S. Dollar Index, which monitors the greenback against 10 major counterparts, fell 0.2 percent to 1,015.35 at 5 p.m. New York time, and touched 1,013.49, the lowest level since Nov. 7.

The dollar declined 0.1 percent to $1.3506 per euro after touching $1.3542, the weakest since Nov. 6. The U.S. currency dropped 0.2 percent to 99.99 yen after rising to 100.44 on Nov. 15, the strongest level since Sept. 11. Japan’s currency rose 0.1 to 135.05 per euro after depreciating to 135.40, the weakest level since Oct. 30.

Rupee, Real

Emerging-market currencies advanced with global stocks as China’s leaders vowed to allow more private investment in state-controlled industries and expand farmers’ land rights. The Shanghai Composite Index of shares jumped 2.9 percent to the highest since Oct. 22 on a closing basis, and the MSCI Asia Pacific Index of shares rose for a third day, climbing 1 percent.

The Indian rupee jumped as much as 1.2 percent to 62.375 per dollar, the strongest since Nov. 7. South Africa’s rand strengthened for a fourth day, increasing as much as 0.8 percent to 10.0828 per dollar, the strongest since Nov. 1. Korea’s won gained 0.5 percent to 1,057.90 per dollar.

Brazil’s real climbed the most among emerging-market currencies amid plans of eased economic rules in China, the nation’s biggest trading partner. The currency rose as much as 2.3 percent, the largest increase since Sept. 18, to close at 2.2639 per dollar.

Dudley’s View

“While growth in 2013 has been disappointing, I believe a good case can be made that the pace of growth will pick up some in 2014 and then somewhat more in 2015,” Dudley, 60, said in the text of remarks given in Flushing, New York, today. “As growth picks up, I expect to see more substantial improvement in labor market conditions.”

At her Nov. 14 congressional hearing, Fed Vice Chairman Yellen indicated she’ll press on with the central bank’s unprecedented monetary stimulus until she sees a robust recovery, downplaying risks the policy is inflating asset bubbles.

“The market is treating the dollar with benign neglect,” said Peter Kinsella, a foreign-exchange strategist at Commerzbank AG in London. “Yellen was dovish and some of the structural U.S. data isn’t fantastic. As long as equity sentiment remains as good as it is, I don’t see a reason for the dollar to appreciate strongly.”

Retail Sales

The Commerce Department will say on Nov. 20 retail sales in the world’s biggest economy were little changed in October after a 0.1 percent decline the previous month, according to the median estimate of economists surveyed by Bloomberg News. A report on the same day will show consumer prices stagnated last month after rising 0.2 percent in September, according to a separate Bloomberg survey of analysts.

Economists forecast the Fed will delay tapering asset purchases until March even after a report showed employers added more jobs than forecast in October.

Policy makers will pare the monthly pace of bond buying to $70 billion at their March 18-19 meeting from the current pace of $85 billion, according to the median of 32 economist estimates in a Bloomberg survey on Nov. 8.

“We’re seeing a broad risk-on type of sentiment, which is playing out through underperforming safe-haven assets like the U.S. dollar,” Omer Esiner, chief market analyst in Washington at the currency brokerage Commonwealth Foreign Exchange Inc., said in a phone interview. “This is partially being fueled by expectations the Fed taper will remain sidelined until next year, which is largely based on the testimony from Yellen last week.”

Options Trading

Trading in over-the-counter foreign-exchange options totaled $51 billion, from $53 billion on Nov. 15, 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 23 percent. Options on the euro-dollar rate totaled $11 billion, or 22 percent.

Greenback-yen options trading was 25 percent more than the average for the past five Mondays at a similar time in the day, according to Bloomberg analysis. Euro-dollar options trading was 89 percent above average.

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