Dollar Falls for Fourth Month Against Euro; US Growth Aids Risk Demand
Oct. 30 (Bloomberg) -- The dollar fell toward its fourthmonthly drop against the euro, the longest stretch since 2004,as the U.S.’s return to growth renewed optimism a globalrecovery will quicken, aiding demand for higher-yielding assets.
The yen is set for the biggest monthly slide against the16-nation currency since May, after a government report showedJapan’s jobless rate unexpectedly dropped for a second month,reducing demand for the relative safety of the Japanese currency.Australia’s dollar is rising for a record ninth month as globalstocks rallied and prices climbed for commodities that comprisemore than half the South Pacific nation’s exports.
“The recovery is still at work and the liquidity isample,” said Tomohiro Nishida, a dealer in Tokyo at Chuo MitsuiTrust & Banking Co., a unit of Japan’s seventh-largest bankinggroup. “You can’t stop money flying into higher-yieldingcurrencies at the expense of funding currencies.”
The dollar traded at $1.4853 per euro at 1:21 p.m. in Tokyofrom $1.4822 yesterday in New York. The yen was at 135.54 pereuro from 135.51 yesterday and is set to fall 3.1 percent thismonth. The greenback bought 91.24 yen from 91.41 yen.
Australia’s currency bought 91.69 U.S. cents from 91.50cents in New York yesterday and is set to gain 3.9 percent inOctober.
The MSCI Asia Pacific Index of regional shares advanced 1.8percent today and the Nikkei 225 Stock Average gained 1.4percent. The Standard & Poor’s 500 Index increased 2.3 percentyesterday and crude oil for December delivery increased 3.8percent to $79.87 a barrel.
U.S. Recovering
The dollar fell against 14 of its 16 most-tradedcounterparts as a Bloomberg News survey of economists showedthat the Institute for Supply Management-Chicago Inc.’s businessbarometer probably rose to 49.0 in October from 46.1 in theprevious month. The data is due today.
Adding to signs the world’s largest economy is recovering,the Institute for Supply Management’s factory gauge also rose to53.0 in October from 52.6 in the previous month, according to aseparate Bloomberg News survey before the release on Nov. 3.Fifty is the dividing line between expansion and contraction.
The Commerce Department reported yesterday that U.S. grossdomestic product grew at a 3.5 percent annual pace in the thirdquarter, after shrinking the previous four periods. The medianforecast of 79 economists in a Bloomberg survey was for anexpansion of 3.2 percent.
Fed Rate View
Investors remained skeptical that the Federal Reserve willincrease borrowing costs early next year. Fed funds futuresindicated yesterday a 33 percent chance that the central bankwill lift its target lending rate at the March meeting from arange of zero to 0.25 percent, compared with a 47 percentlikelihood a month earlier.
“The Fed is still far away from exiting credit easing,”said Kengo Suzuki, manager of the foreign bond department inTokyo at Mizuho Securities Co. “The hyper-liquidity will keep alid on the dollar.” The Federal Reserve Board holds a two-daypolicy meeting next week.
The Bank of Japan today said it will let programs to buycorporate debt expire at year-end as policy makers around theworld start phasing out emergency measures taken at the heightof the financial crisis.
Bank of Japan
The BOJ decided to end purchases of commercial paper andcorporate bonds from lenders as scheduled, while extendingunlimited collateral-backed lending through March 31, the banksaid in a statement released in Tokyo today. It kept thebenchmark interest rate unchanged at 0.1 percent.
The yen headed for its ninth-straight monthly declineagainst the New Zealand dollar, the longest losing streak since1997, as Japan’s unemployment rate dropped to 5.3 percent from5.5 percent in August. The median estimate of 29 economistssurveyed by Bloomberg was for the rate to increase to 5.6percent.
“Good data from Japan will strengthen the risk appetitethat resurfaced on strong U.S. data,” said Takashi Kudo,director of foreign-exchange sales in Tokyo at NTT SmartTradeInc., a unit of Nippon Telegraph & Telephone Corp.
Separate Japanese government figures showed the job-to-applicant ratio, a leading indicator of employment trends,improved for the first time in more than two years. The ratiorose to 0.43 last month from a record low of 0.42 in August,meaning there are 43 jobs for 100 job seekers.
Euro Versus Pound
The euro may rise for the first time in four days againstthe pound on speculation a German report will show retail salesrebounded in September, adding to signs the recession in the 16-nation region is over.
Retail sales in Germany, Europe’s largest economy, rose 1percent in September after a revised 2.4 percent decline inAugust, according to a Bloomberg News survey of economists. TheFederal Statistics Office releases the report at 8 a.m. inWiesbaden today.
“The recovery in the euro-zone economy appears to be on asolid footing,” said Masanobu Ishikawa, general manager offoreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’slargest currency broker. “The bias is for the euro to rise.”
European Central Bank council member Axel Weber yesterdaysignaled policy makers may start to withdraw emergency stimulusmeasures next year by scaling back the bank’s “very long-term”loans to banks. The comments are the first to indicate the ECBis getting closer to enacting its exit strategy.
The euro traded at 89.61 pence from 89.58 pence in New Yorkyesterday, and was set for its first monthly decline versus thepound since June.
To contact the reporters on this story:Yasuhiko Seki in Tokyo at yseki5@bloomberg.net;Ron Harui in Singapore at rharui@bloomberg.net
Last Updated: October 30, 2009 00:25 EDTSource: Bloomberg
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