Dollar Weakens to 14-Year Low, Asia Stocks Fall; Metals Rise
Nov. 26 (Bloomberg) -- The dollar dropped to a 14-year lowagainst the yen. Asian stocks declined, led by Japaneseexporters, and European stocks fell.
The yen strengthened 0.5 percent versus the dollar to 86.89at 7:10 a.m. in London. The MSCI Asia Pacific Index fell 0.4percent and Japan’s Topix Index lost 0.5 percent, dragged downby automakers. The Dow Jones Stoxx Index of European companieslost 1 percent. Gold dropped 0.3 percent after earlier rising toa record $1,196.80 an ounce.
The dollar fell to the lowest since July 1995 after theFederal Reserve said on Nov. 24 that its drop was “orderly,” asignal to traders that the U.S. won’t prop up the currency asthe world’s largest economy recovers from the first globalrecession since World War II. The dollar’s decline threatensprofits for Asia’s exporters after the MSCI Asia Pacific Indexgained 32 percent this year to trade at 1.5 times book value, upfrom 1.03 in March, according to data compiled by Bloomberg.
“I’m not going to risk uncertainty when I’m sitting onnice gains for my portfolio,” said Roger Groebli, Singapore-based head of financial market analysis at LGT CapitalManagement, which oversees about $75 billion in assets. “Theweak dollar is hurting Japanese exporters and theircompetitiveness.”
‘Watching These Movements’
Japanese Finance Minister Hirohisa Fujii said the governmentneeds to take action on abnormal currency movements, remarksthat failed to prevent the yen’s advance.
“I am watching these movements, right now it’s time towatch them closely,” he told reporters in Tokyo today. “Weneed to take appropriate action against abnormal movements.”
Fujii said yesterday that the dollar’s weakness is spurringthe yen’s gain. Today he said “a strong U.S. dollar is in theirnational interest. There is no change in our support for that.”
While the U.S. currency fell against the yen, the DollarIndex, which tracks the greenback against the currencies of sixtrading partners, rose 0.3 percent to 74.500 after reaching a15-month low yesterday. Standard & Poor’s 500 Index futures fell0.8 percent, and U.S. markets are closed for the Thanksgivingholiday.
Fed officials said in minutes of their Nov. 3-4 meetingreleased on Nov. 24 that the dollar’s decline has been“orderly” and that they would watch for any signs that thedepreciation is pushing up people’s expectations for inflation.
Record-low interest rates might fuel “excessive”speculation in financial markets and possibly dislodgeexpectations for low inflation, according to the minutes. Policymakers agreed that the chances of such effects were “relativelylow” and they will remain alert to the risks.
Japan Stocks
Japan’s Topix declined 0.5 percent to 829.56. Honda MotorCo., which generated 42 percent of its sales from North Americain the third quarter, lost 1.1 percent to 2,765 yen. PioneerCorp., which makes car-navigation and audio equipment, sank 0.4percent to 240 yen.
“The strong yen will curb a further rebound in corporateearnings and weigh on investor sentiment,” said MitsushigeAkino, who oversees the equivalent of $450 million in Tokyo atIchiyoshi Investment Management Co.
The Shanghai Composite Index fell 3.6 percent after ChinaMinsheng Banking Corp. became the first of the nation’s lendersin four years to fall in its Hong Kong trading debut. Minshengdropped 3.1 percent to HK$8.80 after raising HK$30.1 billion($3.9 billion) in the city’s biggest public share sale sinceApril 2007.
China Banks
The decline added to concerns about Asia’s banks, whichneed more capital. China’s five largest banks submittedpreliminary plans to regulators earlier this week, according tofour people with knowledge of the matter. Industrial &Commercial Bank, the world’s third-largest company by marketvalue, lost 2.8 percent.
Stocks rose earlier after Indonesia’s central bank raisedits 2009 growth forecast to as much as 4.5 percent andeconomists estimated Taiwan will say later today that grossdomestic product contracted the least in a year during the thirdquarter. U.S. indexes rose yesterday as U.S. reports showed newhome sales beat analyst forecasts and jobless claims fell,spurring optimism the world’s largest economy is recovering fromthe first global recession since World War II.
Australia’s currency declined 1.2 percent 92.11 U.S. cents,nearly undoing yesterday’s 1.4 percent surge on prospects theReserve Bank of Australia will raise rates for a record thirdmonth next week. The so-called Aussie lost 1.7 percent againstthe yen after the nation’s statistics bureau said capitalspending declined 3.9 percent from the previous quarter. The NewZealand dollar declined 1.4 percent to 72.22 U.S. cents.
Taiwan Dollar
Taiwan’s dollar was little changed at NT$32.24 to the U.S.currency. Gross domestic product shrank 2.6 percent in the threemonths through September, the least in a year, according to themedian estimate of 17 economists in a Bloomberg News survey. Thegovernment will announce the figures at about 5 p.m. in Taipei.
Vietnam’s dong plunged as much as 3.4 percent to a recordlow of 18,500 against the dollar in Hanoi after the central bankdevalued the currency to curb quickening inflation and awidening trade deficit. The VN Index sank 4.1 percent, thelowest since Aug. 7.
Gold for immediate delivery climbed to as high as $1,195.13an ounce, compared with yesterday’s close of $1,191.80. Zincfutures in Shanghai rallied as much as 1.8 percent to 19,000yuan a ton before trading at 18,415 yuan.
“Metals climbed across the board because of the dollar’sslump,” Zhu Yanzhong, an analyst at Jinrui Futures Co. said inan e-mailed report today.
Oil Support
Oil fell 1.2 percent to $77.05 a barrel in New York astraders sold contracts to lock in gains ahead of theThanksgiving holiday and after the U.S. Energy Department saidcrude inventories at the world’s largest energy consumer rose.
“We can expect some profit-taking selling after lastnight’s sharp gains, led by gold and the euro,” said KenHasegawa, a commodity derivatives sales manager at Newedge inTokyo. “It’s possible to go as low as $76.50 -- that’s thelevel before it started rising yesterday.”
The economies of the Organization for Economic Cooperationand Development’s 30 member countries grew in the third quarterfor the first time in more than a year led by a revival inoutput in Japan and the U.S., the OECD said in a statement thisweek.
Dubai’s Department of Finance said yesterday that DubaiWorld, with $59 billion of liabilities, is seeking to delay debtpayments. Contracts protecting Dubai against default climbed 122basis points to 440 basis points yesterday, the most since theybegan trading in January, according to credit-default swapprices from CMA Datavision.
To contact the reporter on the story:Chua Kong Ho in Shanghai at kchua6@bloomberg.net;Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
Last Updated: November 26, 2009 03:29 ESTSource: Bloomberg
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