BLBG: Dollar Falls Versus Euro as Banking Outlook Pares Safety Demand
The dollar fell against the euro after Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley applied to refund government bailout cash, reducing demand for safety.
The Australian dollar rose to the strongest level since October after Reserve Bank Governor Glenn Stevens said the global recovery may begin “towards the end of the year.” The dollar dropped against the yen as a government report showed housing starts in the U.S. unexpectedly slid last month.
“The correlation between the level of confidence and risk appetite is still intact,” said Neil Jones, head of hedge-fund sales in London at Mizuho Corporate Bank Ltd. “The yen accelerated declines since the announcement of U.S. banks’ ability and desire to repay funds, which boosted confidence.”
The yen traded at 130.58 per euro at 8:36 a.m. in New York, compared with 130.61 yesterday. The dollar depreciated 0.3 percent to $1.3602 per euro from $1.3562. The dollar lost 0.3 percent to 96.18 yen from 96.30.
The euro strengthened versus the dollar after the ZEW Center for European Economic Research said its index of investor and analyst expectations, which aims to predict economic developments six months ahead, increased to 31.1, from 13 in April. Economists expected a reading of 20, the median of 35 forecasts in a Bloomberg News survey showed.
The U.S. currency declined against all but one of the 16 most actively traded currencies tracked by Bloomberg after Goldman Sachs, JPMorgan and Morgan Stanley applied to refund a combined $45 billion of government funds, the people familiar with the matter said.
Housing Starts
Housing starts in the U.S. decreased last month to an annual rate of 458,000 from 525,000 in March, the Commerce Department reported today. The median forecast of 74 economists surveyed by Bloomberg was for a reading of 520,000.
The Dollar Index, used by the ICE to track the U.S. currency versus the euro, yen, pound, Swiss franc, Canadian dollar and krona, fell 0.6 percent to 82.17. The gauge of the greenback decreased 8.2 percent since reaching a three-year high of 89.62 on March 4 as signs the global slump is easing led investors to sell Treasuries.
Brazil and China will try to use their own currencies, rather than the dollar, in trade transactions, the Financial Times reported, citing aides to Brazilian President Luiz Inácio Lula da Silva and central bank officials.
Brazil and China
“What we are talking about now is Brazil paying for Chinese goods with reals and China paying for Brazilian goods with renminbi,” the report quoted a Brazilian central bank official it didn’t name as saying. Governors of the countries’ central banks will probably meet soon to discuss the matter, the report said.
The yen declined versus the euro for a second day as U.S. equity futures gained. The Dow Jones 600 index of European stocks climbed 1.5 percent, while futures on the Standard & Poor’s 500 Index expiring in June added 0.4 percent
“The healing in market stress continues,” Mitul Kotecha, head of global foreign-exchange strategy at Calyon in Hong Kong, wrote in a note sent to clients today. “Risk currencies moved back into favor.”
The won rose 0.8 percent to 1,249.25 against the dollar as overseas investors bought more local shares than they sold for a third day. South Korea’s’ currency extended gains in the past month to 6.6 percent against the dollar, the best performance among the 10 most actively traded currencies tracked by Bloomberg. It reached 1,225.97 on May 11, the strongest level since October.
‘Early Boost’
“The won is getting an early boost from an overnight rally in U.S. shares and as foreign investors continue buying local stocks,” said Jo Hyun Suk, a currency dealer at Korea Exchange Bank in Seoul.
The pound reached 1.5514, the highest since Dec. 18, after ICAP Plc and Marks & Spencer Group Plc posted profit that beat analysts’ estimates, spurring speculation the worst of British recession is over.
“News from the corporate front is pretty encouraging and that’s supporting the pound,” said Jeremy Stretch, a senior currency strategist at Rabobank International in London. “Markets are looking through the debris for pieces of good news and then acting accordingly.”
