Dollar Gains to 7-Year High on Retail Sales, Consumers

The dollar rose, reaching a seven-year high versus the yen, as reports showing gains in retail sales and consumer confidence boosted optimism growth in the U.S. economy is gathering momentum.

The euro rose and the yen trimmed its weekly loss as U.S. Treasury yields fell before the Group of 20 summit meeting tomorrow. Brazil’s real fell to a nine-year low on allegations of corruption and money laundering at its state-run oil producer. Switzerland’s franc headed for a sixth weekly advance versus the euro and prompted speculation the nation’s central bank will intervene to defend its cap.

“The October data showed a solid gain,” said Vassili Serebriakov, a New York-based foreign-exchange strategist at BNP Paribas SA. “There’s obviously some caution ahead of the G-20 meeting. It’s a meeting that includes some of the emerging-market countries that have concerns over the weaker yen.”

The dollar advanced 0.5 percent to 116.29 yen at 5 p.m. New York time, and reached 116.82, the highest level since October 2007. It fell 0.4 percent to $1.2525 per euro. The 18-nation common currency added 0.9 percent to 145.67 yen.

The dollar is up 8 percent this year, the strongest gain among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro has lost 2.6 percent while the yen has declined 3.3 percent.

Futures Positions

Hedge funds and other large speculators increased bets on dollar strength versus eight of its major peers to a record. The difference in the number of wagers on gains compared with those on declines -- net longs -- was 372,558 on Nov. 11, according to data from the Washington-based Commodity Futures Trading Commission.

Investors also boosted their bets on a decline in the Japanese currency against the dollar with net shorts at 82,563, up from 71,651 a week earlier.

Brazil’s real dropped 0.5 percent to 2.6016 per dollar after reaching 2.6287. Petroleo Brasileiro SA delayed the release of earnings for a month amid an escalating corruption scandal that led to the arrest of a second former executive today.

The scandal, dubbed “Car Wash,” has put President Dilma Rousseff, who was Petrobras chairwoman from 2003 to 2010, on the defensive and was a major theme in last month’s elections that she won by a narrow margin.

Real Weakness

“Many foreign investors -- and even Brazilians who have money abroad -- are selling Petrobras’s stock and converting reais into dollars, which puts pressure on the local currency,” Mario Battistel, a foreign-exchange trader at Fair Corretora, said in a telephone interview from Sao Paulo.

The Swiss franc appreciated, pushing it to the closest to the central bank’s 1.20-per-euro currency cap since September 2012, as investors position for a Nov. 30 referendum. If passed, the proposal would require the central bank to increase its gold holdings, which risks making it harder for Swiss National Bank policy makers to control the exchange rate by purchasing currencies.

The franc reached 1.20111 per euro, within “the red zone” for SNB interventions, according to Peter Rosenstreich, the chief foreign-exchange analyst at Swissquote Bank SA in Gland, Switzerland.

The yen fell for a fourth week as debate about an increase in the sales tax became the latest factor to weaken the currency.

Japan Watch

Japan’s prime minister will hold a news conference next week to announce a delay in the sales-tax increase, Mainichi newspaper reported, without saying who provided the information. Abe will also explain the reasons for his decision to dissolve parliament at the news conference, according to the report.

The Japanese currency is extending a slide set off after the Bank of Japan on Oct. 31 expanded stimulus to a record and the nation’s pension fund outlined a plan to increase overseas investment. The central bank’s next meet is Nov. 19.

The G-20 officials meeting in Brisbane may include talks about Japan’s effort to weaken the yen, which erode export competitiveness of its neighbors, including China and South Korea.

A similar meeting in Washington in April 2013 heightened the leaders’ commitment to being “mindful of unintended negative side effects stemming from extended periods of monetary easing.”

Economic Indicators

A report showed the euro area’s economy grew faster than analysts forecast in the third quarter. Gross domestic product increased 0.2 percent from the previous period, when it rose 0.1 percent. The median estimate in a Bloomberg News survey of analysts was for 0.1 percent expansion.

A separate report confirmed the annualized consumer-price inflation rate in the currency bloc was 0.4 percent last month, up from 0.3 percent in September.

U.S. retail sales increased 0.3 percent, the Commerce Department reported in Washington. The median forecast in a Bloomberg survey of 86 economists projected a 0.2 percent advance.

“Retail sales numbers become more stellar as we get closer to Christmas,” said Fabian Eliasson, who works in foreign-exchange sales at Mizuho Financial Group Inc. in New York. “I still see upside for dollar-yen.”

The Thomson Reuters/University of Michigan preliminary sentiment index increased to 89.4, exceeding the highest estimate in a Bloomberg survey and the strongest since July 2007, from a final reading of 86.9 in October. The median projection called for a gain to 87.5.

Treasury yields fell as the reports suggested the economy is growing with little risk of inflation, allowing the Federal Reserve to proceed with plans to increase borrowing costs next year. Benchmark 10-year note yields dropped two basis points, or 0.02 percentage point, to 2.32 percent.

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major currencies, slipped 0.2 percent to 1,092.66. It rose to 1,100.92 earlier, the highest level on a closing basis since March 2009.

Before it's here, it's on the Bloomberg Terminal.