BLBG: Dollar Falls as U.S. Banking Outlook Reduces Demand for Safety
The dollar fell against most of its major counterparts 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.
“Right now, market sentiment trumps economic fundamentals,” said Michael Woolfolk, senior currency strategist at Bank of New York Mellon Corp. in New York. “Housing is in a correction phase. We know the improvement of the economy won’t be a straight line.”
The dollar traded at $1.3576 per euro at 9:10 a.m. in New York, compared with $1.3562 yesterday. The dollar lost 0.2 percent to 96.09 yen from 96.30. The yen advanced 0.2 percent to 130.31 per euro from 130.61.
The euro earlier 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 this month to 31.1, a three-year high, from 13 in April.
The U.S. currency declined against most 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.
Dollar Index
The Dollar Index, used by the ICE to track the U.S. currency versus the euro, yen, pound, Swiss franc, Canadian dollar and Swedish krona, fell 0.3 percent to 82.412. The gauge of the greenback decreased 8.2 percent since reaching a three- year high of 89.624 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.
“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.
Stronger Won
South Korea’s 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. It extended gains in the past month to 6.6 percent, the best performance among the 10 most actively traded currencies tracked by Bloomberg. The won reached 1,225.97 on May 11, the strongest level since October.
The pound appreciated as much as 1.1 percent to $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.”
Australian Dollar
The Australian dollar advanced as much as 1.4 percent to 77.51 U.S. cents, the strongest level since Oct. 3, as Stevens of the Reserve Bank said in Sydney that Australia “should be in a relatively good position and well placed to take part in a renewed international expansion.” The New Zealand’s dollar gained 1.1 percent to 60.15 cents.
Losses in the yen may be tempered on speculation overseas investors will buy Japanese government bonds after Moody’s Investors Service yesterday brought Japan’s local and foreign- currency debt ratings to the same level, Aa2, according to Ashley Davies, a currency strategist in Singapore at UBS AG.
Moody’s cut the foreign-currency debt rating from Aaa and raised the local-currency assessment from Aa3, saying it can no longer assume that Japan would be more likely to repay debt borrowed in currencies other than the yen. The outlook remains stable, Moody’s said in a statement.
“This should be net positive for the yen as local-currency JGBs are considered the benchmark in global debt markets,” Davies wrote in a research note today.
