BLBG: Yen, Dollar Fall as Signs of Eased Slump Reduce Safety Demand
The yen and dollar fell against all of their major counterparts on speculation the global economy has seen the worst of its slump, sapping demand for a refuge.
The dollar and yen dropped for a second day against the euro as a report showing a plunge in the U.S. economy also indicated smaller stockpiles may set the stage for a return to growth in the second half of the year.
“The dollar is under pressure as the safe-haven flow is unwinding,” said Sebastien Galy, a currency strategist at BNP Paribas Securities SA in New York. “It points to more risk taking.”
The yen weakened 1 percent to 128.05 per euro at 9:26 a.m. in New York, from 126.79 yesterday. Japan’s currency slid 0.4 percent to 96.79 versus the dollar from 96.45. The dollar declined 0.6 percent to $1.3230 per euro from $1.3149.
U.S. gross domestic product decreased at an annual rate of 6.1 percent in the first quarter, after shrinking 6.3 percent in the final three months of 2008, the Commerce Department reported today in Washington. The median forecast of 71 economists surveyed by Bloomberg was for a decrease of 4.7 percent.
Companies trimmed stockpiles at a $103.7 billion annual rate last quarter, the biggest drop since records began in 1947. Excluding the reduction, the economy would have contracted at a 3.4 percent pace.
The Federal Reserve will keep its target lending rate in a range of zero to 0.25 percent at today’s conclusion of a two-day meeting, a separate Bloomberg survey showed. Policy makers will announce their decision at 2:15 p.m. in Washington.
Dollar Versus Euro
The dollar plunged 3.4 percent against the euro on March 18 as traders speculated the Fed’s purchase of up to $300 billion in Treasuries would debase the currency. It was the biggest drop in the greenback since the euro’s 1999 debut.
The euro rose earlier against the dollar and yen after an index of executive and consumer sentiment in the 16 nations that use the single currency increased to 67.2, the first increase since May 2008. The April reading was up from 64.7 in March.
The German economy, Europe’s biggest, will return to growth next year after its steepest decline since World War II, the government said today in an e-mailed statement. The economy will grow 0.5 percent in 2010 after contracting 6 percent this year, the government said.
The euro may be a “lot higher in 12 months” against the dollar as the U.S. is “engaging in a policy mix that will effectively debase” its currency, Citigroup Inc. said.
The dollar will weaken because the Fed “has eased rates more than the European Central Bank will and the U.S. has been more aggressive fiscally than the euro zone will be,” New York- based Tom Fitzpatrick and London-based Shyam Devani wrote in a note yesterday.
‘Debase the Dollar’
“The net result will effectively debase the dollar,” which is “not necessarily a bad thing,” Citigroup said.
The pound gained 0.5 percent to $1.4708 and 0.9 percent to 142.44 yen as better-than-expected earnings spurred gains in stock markets.
“Equity markets and stock futures are in positive territory,” said Masashi Kurabe, head of currency sales and trading at Bank of Tokyo-Mitsubishi UFJ Ltd. in Hong Kong. “This is causing selling of the yen.”
The Dow Jones Stoxx 600 Index added 1.1 percent, while the FTSE 100 Index of U.K. stocks gained 1.1 percent. The Standard & Poor’s 500 Index was 0.2 percent higher. The MSCI World Index rose 0.7 percent.
Siemens Profit
Operating profit at Siemens AG’s industry, energy and health-care units climbed to 1.84 billion euros ($2.43 billion) from 1.29 billion euros, the Munich-based company said today. Analysts in a Bloomberg survey predicted 1.65 billion euros.
DreamWorks Animation SKG Inc., the maker of ‘Shrek’ movies, said first-quarter profit more than doubled on theatrical and home-video sales from “Madagascar: Escape 2 Africa.”
Japan’s currency fell for the first time in nine days versus the South Korean won after the Bank of Korea said the current-account surplus, the broadest measure of trade, swelled to $6.65 billion last month, almost doubling from February. New Zealand’s exports surged 17 percent from the prior month, the first back-to-back increase since December 2007, the statistics bureau said.
“Overall the data are slightly more positive,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “This is weighing on the yen and the dollar.”
