Dollar Falls on Yellen Rates Pledge Amid Mixed Economy

The dollar extended its streak of declines to the longest since April before reports this week forecast to show orders for durable goods declined and a smaller gain in new home sales in the world’s largest economy.

The U.S. currency slipped against all except one of its 16 major peers after Federal Reserve Chair Janet Yellen last week said the central bank remains committed to low interest rates for a “considerable time.” Australia’s dollar jumped while New Zealand’s currency reached a six-week high after a report showed manufacturing in China improved more in June than analysts expected. The Canadian dollar gained.

“We have tended to digest better U.S. data and taken it on the chin,” said Alan Ruskin, the global head of Group of 10 foreign exchange at Deutsche Bank AG in New York. “After we heard from Yellen last week, we know what the Fed’s take is in terms of growth and inflation data. They certainly expect the economy to come back, but there’s some uncertainty, and there’s still a long way to go before tightening.”

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 of its major counterparts, declined 0.1 percent to 1,008.89 at 5 p.m. New York time. The gauge fell for a fourth day, the longest streak of losses since the period ending April 30.

The dollar weakened 0.1 percent to 101.93 yen. The U.S. currency was little changed at $1.3605 per euro. The shared currency depreciated 0.1 percent to 138.67 yen.

Ruble, Rand

A Deutsche Bank AG measure of volatility was at 5.39 percent after dropping to 5.28 percent on June 19, the lowest close since August 2001. One-month implied volatility in dollar-yen was at 4.96 percent after touching 4.875 percent earlier. That matched the June 19 close which was the lowest since Bloomberg started compiling the data in December 1995.

Most emerging-market currencies advanced after HSBC Holdings Plc and Markit Economics said today its preliminary Chinese manufacturing purchasing managers’ index rose to 50.8 this month, compared with analyst estimates for an increase to 49.7 from 49.4 in May.

Russia’s ruble added 0.9 percent and Brazil’s real advanced 0.5 percent. The South African rand gained for a second day, rising 0.5 percent to 10.5971 as a five-month strike of miners at the world’s three largest platinum companies moved closer to an end after union members accepted a pay offer.

Australia’s dollar added 0.4 percent to 94.22 U.S. cents and reached 94.45 cents, the strongest since April 10. New Zealand’s currency climbed 0.2 percent to 87.12 U.S. cents after reaching 87.49, a level unseen since May 6. China is Australia and New Zealand’s biggest trading partner.

Carry Trade

“The main trade continues to be long carry, long risk,” said Michael Sneyd, a London-based currency strategist at BNP Paribas SA, by phone from New York. “Despite the fact that U.S. yields are pushing higher, the dollar isn’t really gaining much traction.” Carry trades allow investors to profit from differences in interest rates. A long position is a bet that an asset will increase in value.

The Canadian dollar gained 0.2 percent to C$1.0732 per U.S. dollar.

A close stronger than C$1.0734 clears the way for an advance to C$1.0635, George Davis, chief technical analyst at Royal Bank of Canada’s RBC Capital Markets unit, wrote in a client note earlier today. The currency broke out of a six-week range June 20 after a report showed the nation’s consumer prices rose beyond the central bank’s target for the first time in more than two years.

Yields on 10-year Treasuries rose for a third week last week. Yields increased two basis points, or 0.02 percentage point, to 2.63 percent today.

Japan Policy

Japan’s government is considering bringing forward cabinet approval of its growth strategy and basic economic plan to tomorrow from June 27, Kyodo News reported on June 19, citing a government source.

“Dollar-yen may break below the 200-day moving average and Japanese stocks may fall if the government’s renewed growth strategy disappoints,” said Toshiya Yamauchi, a senior analyst in Tokyo at Ueda Harlow Ltd., which provides margin-trading services.

The U.S. economy shrank 1.8 percent in the first quarter, a June 25 report will indicate, according to a Bloomberg survey of analysts. That’s a greater decline than the reading of a 1 percent contraction on May 29.

U.S. factory orders for durable goods fell 0.1 percent in May, according to the median estimate of economists polled in a separate survey before the Commerce Department report June 25. Orders rose 0.6 percent in April.

Economic Update

Existing home sales accelerated 4.9 percent last month, the biggest monthly increase in almost three years. A report tomorrow will show new home sales in the U.S. grew 1.4 percent in May from a 6.4 percent gain the previous month.

“It’s a combination of the still very dovish Fed and yet still pretty decent underlying economic data,” said Peter Kinsella, a senior currency strategist at Commerzbank AG in London. “It’s the classic Goldilocks scenario. The data’s coming in, it’s not too hot, it’s not too cold, and people sell the dollar and trade it with a benign neglect.”

(An earlier version of this story corrected a reference to the U.S. manufacturing gauge to show it remained above the level indicating expansion.)

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