BLBG: Dollar Rises Most Against Yen in More Than Week on Retail Gain
By Ben Levisohn
April 14 (Bloomberg) -- The dollar increased the most versus the yen in more than a week as a report showed U.S. retail sales climbed in March more than economists forecast.
The yen fell against most of its major counterparts as evidence the global recovery is gaining momentum spurred demand for assets linked to growth. The dollar briefly pared its gain versus the yen as Federal Reserve Chairman Ben S. Bernanke said in testimony to Congress that U.S. economic expansion will remain moderate.
“People are selling the yen and starting to buy other higher-yielding assets as world economic data comes in better than expected,” said John Doyle, a strategist at currency- trading firm Tempus Consulting Inc. in Washington.
The dollar advanced as much as 0.6 percent to 93.72 yen in the biggest intraday gain since April 2 before trading at 93.62 yen at 10:06 a.m. in New York, compared with 93.20 yesterday. The yen slid 0.4 percent to 127.40 per euro, from 126.88. The dollar traded at $1.3619 per euro, compared with $1.3614.
Richmond Fed President Jeffrey Lacker said yesterday the central bank may amend “sooner rather than later” its pledge to keep interest rates at a record low.
The Labor Department’s report of 162,000 jobs added to payrolls in March was the “most encouraging sign” yet of a recovery, and the “risk of a pronounced decline in inflation has diminished substantially,” Lacker said yesterday in a speech in Morgantown, West Virginia.
Outlook for Yen
By the end of this year, the dollar may rise to 105 yen, a level last reached in October 2008, as the Fed starts raising interest rates as soon as June, according to SBI Liquidity Market Co.
“I expect the Fed to exit this year,” said Makoto Kojima, Tokyo-based general manager of global markets at SBI, a unit of SBI Holdings Inc., a financial services company. “They will start doing so earlier than many people expect.”
Futures on the CME Group Inc. exchange show a 79 percent chance that U.S. policy makers will hold the target lending rate at zero to 0.25 percent through its June meeting, up from 72 percent odds a month ago.
Australia’s dollar advanced 0.7 percent to 87.24 yen and Brazil’s real appreciated 0.8 percent to 53.56 yen on speculation signs of a global economic recovery will encourage investors to increase carry trades, in which they buy higher- yielding assets with amounts borrowed in nations with low interest rates. The target lending rate of 0.1 percent in Japan has made the yen popular for funding such transactions.
U.S. Retail Gain
U.S. retail sales increased 1.6 percent in March after a revised 0.5 percent advance in the previous month, the Commerce Department reported today. The median forecast of 79 economists in a Bloomberg News survey was for a 1.2 percent increase.
A 0.1 percent gain in the consumer price index was in line with expectations and followed no change in February, the Labor Department reported today. Excluding food and fuel, the core rate held steady after rising 0.1 percent in February.
“The latest consumer and inflation data fits perfectly with the recovery taking hold at a point where spare capacity is still holding down inflation pressure,” said Alan Ruskin, head of currency strategy at Royal Bank of Scotland Group Plc in Stamford, Connecticut. “This is a perfect scenario for risk appetite.”
Canada’s dollar appreciated to the strongest level since June 2008 versus its U.S. counterpart on an increase in oil, Canada’s largest export. The loonie has gained 5.4 percent this year in the second-best performance versus the U.S. dollar among its 16 most-traded counterparts after Mexico’s peso.
Crude Oil Advances
Crude oil for May delivery rose as much as much as 1.2 percent to $85.05 a barrel after five days of decreases. The Standard & Poor’s 500 Index advanced 0.4 percent.
Singapore’s dollar climbed as much as 1.3 percent to S$1.3741, the strongest level since August 2008, after the Monetary Authority said it will seek a “modest and gradual appreciation” in the currency.
The decision adds to signs that China, which will probably report its quickest expansion in three years tomorrow, is preparing to end the yuan’s 21-month-old peg to the dollar.
“Singapore doesn’t want to be behind the curve as other central banks tighten monetary policy,” said Alvin Liew, an economist at Standard Chartered Plc in Singapore. “The central bank is concerned about domestic and imported inflation as the global economy strengthens.”
The trade ministry said the $182 billion economy will expand as much as 9 percent in 2010, compared with a previous outlook of 6.5 percent, after the fastest growth since at least 1975 in the first quarter.
To contact the reporter on this story: Ben Levisohn in New York at blevisohn@bloomberg.net
