Sept. 16 (Bloomberg) -- The dollar dropped to the weakest level this year against the euro on speculation a report on manufacturing will encourage investors to sell the greenback and buy higher-yielding assets outside the U.S.
The yen appreciated toward 90 per dollar after incoming Finance Minister Hirohisa Fujii said Japan’s new government is opposed to intervening in currency markets unless swings become excessive. The Australian and New Zealand dollars rose to the highest level in more than a year against the greenback as the MSCI World Index advanced for a second day.
“It’s very clear that the bullish trend in the euro against the dollar is being driven by improved risk appetite,” said Roberto Mialich, a senior global currency strategist in Milan at UniCredit Markets & Investment Banking. “There are signs the global economy is getting brighter.”
The dollar dropped 0.2 percent to $1.4680 per euro at 7:24 a.m. in New York, from $1.4658 yesterday. It earlier reached $1.4714, the weakest level since Dec. 18. The dollar may decline to $1.55 against the single European currency during the first half of 2010, Mialich said. The median forecast of 45 analysts and strategists compiled by Bloomberg News is for the dollar to trade at $1.42 by the end of June 2010.
Japan’s currency traded at 132.51 per euro, compared with 133.47 yesterday. It was at 90.27 per dollar, compared with 91.05. The last time the yen was stronger than 90 was on Feb. 12. Australia’s currency bought 87.08 U.S. cents, after rising to 87.28 cents, the strongest since August 2008. New Zealand’s dollar fetched 71.23 U.S. cents as much as 71.40 earlier today.
Lending Rates
Signs that the U.S. is emerging from its deepest recession since World War II are encouraging investors to buy higher- yielding currencies at the expense of the dollar. The benchmark rate is 3 percent in Australia and 2.5 percent in New Zealand, compared with Japan’s 0.1 percent and as low as zero in the U.S.
U.S. production rose 0.6 percent last month, the biggest gain since October, according to the median forecast of 75 economists surveyed by Bloomberg News. The report from the Federal Reserve is due at 9:15 a.m. New York time.
The MSCI World Index added 0.9 percent, while Europe’s Dow Jones Stoxx 600 Index rose 1 percent. Futures on the Standard & Poor’s 500 Index expiring in December increased 0.5 percent.
The Dollar Index, which tracks the U.S. currency against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, traded at 76.322, from 76.544 yesterday. It earlier fell to 76.187, the lowest since Sept. 23, 2008.
Greenspan on Debt
Former Fed Chairman Alan Greenspan, speaking in a broadcast to Tokyo clients of Deutsche Bank Securities Inc. today, said if there was a significant issuance of Treasury securities that increased the national debt, “there would be of necessity downward pressure on the dollar.”
At the same time, he said, “you can’t say that without saying what the counterparty currency would be.”
A government report today will probably show the U.S. current-account deficit narrowed in the second quarter to $92 billion, the least since 2001, according to a Bloomberg survey of 39 economists. A narrowing deficit reduces pressure on the dollar by making the country less reliant on foreign capital. The current account is the broadest measure of trade because it includes transfer payments and investment income.
The yen rose against the dollar after Fujii, 77, told reporters in Tokyo that recent currency movements “aren’t excessive.” Asked if he’s opposed to intervention, Fujii said, “In principle, yes. Such actions can destroy a free economy.”
Intervention in 2004
Japan hasn’t entered the foreign-exchange market since the central bank, at the request of the Finance Ministry, sold a record 14.8 trillion yen ($160 billion) in the first quarter of 2004 in an effort to weaken the currency.
“They’ve tried to make it clear they are more tolerant of a strong yen and have also suggested they aren’t convinced intervention is effective,” said Daragh Maher, deputy head of global currency strategy in London at Calyon, the investment- banking arm of Credit Agricole SA. “I think they’ll leave it alone to be honest.”
The pound stayed near a four-month low against the euro as a report showed the U.K. jobless rate rose to the highest level since 1995, supporting the case for the Bank of England to keep the benchmark interest rate at a record low of 0.5 percent.
The central bank Governor Mervyn King said yesterday policy makers are considering lowering the rate they pay financial institutions to hold reserves at the bank to encourage lending.
“It’s real rollercoaster ride for sterling at the moment,” Tom Levinson, a currency strategist in London at ING Bank NV, said in a Bloomberg Television interview. “Comments from Governor King were pretty dovish. That’s obviously put sterling back under pressure.”
The pound was at 88.88 pence per euro after earlier reaching 89.31 pence, the weakest level since May 15. Sterling increased 0.2 percent to $1.6520.
The yen appreciated toward 90 per dollar after incoming Finance Minister Hirohisa Fujii said Japan’s new government is opposed to intervening in currency markets unless swings become excessive. The Australian and New Zealand dollars rose to the highest level in more than a year against the greenback as the MSCI World Index advanced for a second day.
“It’s very clear that the bullish trend in the euro against the dollar is being driven by improved risk appetite,” said Roberto Mialich, a senior global currency strategist in Milan at UniCredit Markets & Investment Banking. “There are signs the global economy is getting brighter.”
The dollar dropped 0.2 percent to $1.4680 per euro at 7:24 a.m. in New York, from $1.4658 yesterday. It earlier reached $1.4714, the weakest level since Dec. 18. The dollar may decline to $1.55 against the single European currency during the first half of 2010, Mialich said. The median forecast of 45 analysts and strategists compiled by Bloomberg News is for the dollar to trade at $1.42 by the end of June 2010.
Japan’s currency traded at 132.51 per euro, compared with 133.47 yesterday. It was at 90.27 per dollar, compared with 91.05. The last time the yen was stronger than 90 was on Feb. 12. Australia’s currency bought 87.08 U.S. cents, after rising to 87.28 cents, the strongest since August 2008. New Zealand’s dollar fetched 71.23 U.S. cents as much as 71.40 earlier today.
Lending Rates
Signs that the U.S. is emerging from its deepest recession since World War II are encouraging investors to buy higher- yielding currencies at the expense of the dollar. The benchmark rate is 3 percent in Australia and 2.5 percent in New Zealand, compared with Japan’s 0.1 percent and as low as zero in the U.S.
U.S. production rose 0.6 percent last month, the biggest gain since October, according to the median forecast of 75 economists surveyed by Bloomberg News. The report from the Federal Reserve is due at 9:15 a.m. New York time.
The MSCI World Index added 0.9 percent, while Europe’s Dow Jones Stoxx 600 Index rose 1 percent. Futures on the Standard & Poor’s 500 Index expiring in December increased 0.5 percent.
The Dollar Index, which tracks the U.S. currency against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, traded at 76.322, from 76.544 yesterday. It earlier fell to 76.187, the lowest since Sept. 23, 2008.
Greenspan on Debt
Former Fed Chairman Alan Greenspan, speaking in a broadcast to Tokyo clients of Deutsche Bank Securities Inc. today, said if there was a significant issuance of Treasury securities that increased the national debt, “there would be of necessity downward pressure on the dollar.”
At the same time, he said, “you can’t say that without saying what the counterparty currency would be.”
A government report today will probably show the U.S. current-account deficit narrowed in the second quarter to $92 billion, the least since 2001, according to a Bloomberg survey of 39 economists. A narrowing deficit reduces pressure on the dollar by making the country less reliant on foreign capital. The current account is the broadest measure of trade because it includes transfer payments and investment income.
The yen rose against the dollar after Fujii, 77, told reporters in Tokyo that recent currency movements “aren’t excessive.” Asked if he’s opposed to intervention, Fujii said, “In principle, yes. Such actions can destroy a free economy.”
Intervention in 2004
Japan hasn’t entered the foreign-exchange market since the central bank, at the request of the Finance Ministry, sold a record 14.8 trillion yen ($160 billion) in the first quarter of 2004 in an effort to weaken the currency.
“They’ve tried to make it clear they are more tolerant of a strong yen and have also suggested they aren’t convinced intervention is effective,” said Daragh Maher, deputy head of global currency strategy in London at Calyon, the investment- banking arm of Credit Agricole SA. “I think they’ll leave it alone to be honest.”
The pound stayed near a four-month low against the euro as a report showed the U.K. jobless rate rose to the highest level since 1995, supporting the case for the Bank of England to keep the benchmark interest rate at a record low of 0.5 percent.
The central bank Governor Mervyn King said yesterday policy makers are considering lowering the rate they pay financial institutions to hold reserves at the bank to encourage lending.
“It’s real rollercoaster ride for sterling at the moment,” Tom Levinson, a currency strategist in London at ING Bank NV, said in a Bloomberg Television interview. “Comments from Governor King were pretty dovish. That’s obviously put sterling back under pressure.”
The pound was at 88.88 pence per euro after earlier reaching 89.31 pence, the weakest level since May 15. Sterling increased 0.2 percent to $1.6520.
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