BLBG: Dollar Declines Toward 15-Year Low Against Yen on Fed Easing Speculation
The dollar fell toward a 15-year low against the yen as a Federal Reserve official reiterated a second round of economic stimulus was required, spurring bets further bond purchases will debase the greenback.
The pound was close to a six-month low versus the euro before a report economists said will show U.K. gross domestic product growth slowed in the third quarter to a third of the pace in the previous three months. Sweden’s krona rose to a three-week high versus the euro on speculation the Nordic central bank will raise its benchmark rate. The baht fell on concern Thailand will unveil steps to slow fund inflows after the currency reached a 13-year high this month.
“The market is focused on the potential for quantitative easing to be announced by the Fed next week,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “We’re likely to see sellers emerge on any rallies in the U.S. dollar.”
The dollar declined to 80.68 yen as of 6:55 a.m. in London from 80.81 yen in New York yesterday, when it fell to 80.41 yen, the weakest since April 1995. The greenback was at $1.3976 per euro from $1.3965, after dropping to $1.4159 Oct. 15, the lowest since Jan. 26. The euro bought 112.75 yen from 112.85 yen. The pound was at 88.72 pence per euro from 88.81 after falling to 89.42 yesterday, the least since March 31.
‘Magic Wand’
Fed Bank of New York President William Dudley reiterated yesterday his view the central bank will probably need to enact further stimulus to combat too-low inflation and a jobless rate near 10 percent.
“The Fed cannot wave a magic wand and make the problems remaining from the proceeding period of excess vanish immediately,” Dudley said. “But we can provide essential support for the needed adjustments.” He will speak on the economy today.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, was little changed at 77.07 after falling to 76.709 yesterday, the least since Oct. 15.
The gauge of the U.S. currency has dropped nine percent since June 30 on speculation the Fed will add to asset purchases to boost the economy in a practice known as quantitative easing. The Fed next meets Nov. 2-3.
U.K. growth slowed to 0.4 percent, from 1.2 percent in the second quarter, a Bloomberg survey of economists showed before the Office for National Statistics report today.
“This week’s Q3 GDP release is likely to show a significant slowdown,” analysts led by Hans-Guenter Redeker, London-based global head of currency strategy at BNP Paribas SA, wrote in a research note yesterday. “The pound is expected to come under pressure.”
Krona Gains
The krona rose for a third day against the euro before a Riksbank meeting today where economists surveyed by Bloomberg predict policy makers will raise the repo rate 0.25 percentage point to 1 percent.
“The focus will be on the communication,” Brian Kim, a currency strategist at UBS AG in Stamford, Connecticut, wrote in a note to clients. “The future trajectory could be steepened somewhat in the short-term, which means more near-term euro- krona downside.”
The krona advanced 0.4 percent to 9.1625 per euro from 9.1955, after climbing to 9.1577, the strongest since Oct. 1.
Baht Gains
The baht fell after Finance Minister Korn Chatikavanij said yesterday policy makers are “keeping an eye” on speculative capital inflows as foreign purchases of local bonds lead to gains in the currency. The baht has risen 11 percent against the dollar this year, the best performer in Asia outside Japan.
“It’s possible to see additional measures to slow inflows,” said Minori Uchida, a senior analyst in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd. “Such concerns may discourage people from aggressively buying the baht for now.”
The baht dropped 0.2 percent to 29.88 per dollar.
Gains in the yen were tempered after Japan’s Vice Finance Minister Fumihiko Igarashi said yesterday currency-market intervention is most effective when it’s unexpected.
“A surprise move would probably be effective to some extent,” Igarashi said in an interview in Tokyo. “We can’t make an announcement in advance that we will act, but, on the other hand, we can’t say that we won’t act either.”
Japan’s currency has appreciated more than 5 percent since authorities intervened in foreign-exchange markets for the first time in six years on Sept. 15.
Japan’s government will make 1.5 trillion yen ($18.6 billion) from its foreign-exchange special account available to Japan Bank for International Cooperation for overseas investment and infrastructure projects, the finance ministry said.
The decision may be construed by some as “indirect intervention,” Sue Trinh, a senior currency strategist in Hong Kong at Royal Bank of Canada, wrote in a note to clients.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.
