Dollar Holds Five-Day Decline After Oil Completes Weekly Advance

  • Aussie, kiwi climb for second day as commodity prices rally
  • Crude recovery signals support for resource-focused economies

Is the Dollar Bull Run Over?

A gauge of the dollar held a five-day decline, its longest slide since April, after oil’s biggest weekly advance in four months bolstered the outlook for global inflation.

The U.S. currency weakened to a two-month low versus the yen as crude futures surged 9.7 percent this week in New York. Recovering oil prices help alleviate concern that a lack of global demand will weaken the economies of resource-reliant nations, such as Canada, South Africa and Brazil. A two-day gain in commodity prices through Thursday helped boost the Australian and New Zealand dollars.

“The dollar may end the year with a little pause but it’s too early to declare the uptrend has reversed,” Koji Fukaya, the Tokyo-based chief executive officer at FPG Securities Co. “The dollar will remain solid through 2016 as interest rates rise with an improving economy.”

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, was at 1,226.41 as of 4:02 p.m. in Tokyo from 1,227.18 on Thursday, when in completed a five-day drop. Financial markets are closed for Christmas on Friday in Australia, New Zealand, the U.K. and the U.S.

The dollar fell 0.1 percent to 120.27 yen, after hitting a two-month low of 120.05. The greenback ended last year at 119.78 yen. It was little changed at $1.0965 per euro Friday, after sliding 0.5 percent in New York. The Aussie gained 0.3 percent to 72.82 U.S. cents and the kiwi rose 0.3 percent to 68.35 cents.

The greenback was set for a 2.3 percent loss against the Japanese currency this month, the largest drop since January 2014, after the Federal Reserve signaled it will raise interest rates gradually next year. Last week, the central bank raised rates for the first time since 2006, while the Bank of Japan made operational changes to reinforce its record stimulus of expanding monetary base by 80 trillion yen ($665 billion).

The dollar may rise toward 126 to 127 yen in the first quarter amid speculation the Fed will raise rates in March or April, said Daisuke Karakama, the chief market economist at Mizuho Bank Ltd. in Tokyo.

“The dollar may see its peak in the first quarter and start to head down after the second,” Karakama said. “It may test 115 yen but find support around 110.”

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