BLBG: Dollar Rises to One-Month High Against Yen as U.S. Treasury Yields Climb
The dollar advanced to a one-month high against the yen as an increase in Treasury yields made assets denominated in the greenback more attractive to international investors.
The euro touched a two-week low against the dollar on speculation banks in the region will struggle to raise funds as the European Central Bank removes stimulus measures. Sterling rose against the dollar as the Bank of England said inflation is likely to remain above policy makers’ target.
“Dollar-yen in particular is sensitive to one- to two-year yields in the U.S.,” said Greg Anderson, a currency strategist at Citigroup Inc. in New York. “It’s the interest-rate differential.”
Japan’s currency slid 0.9 percent to 82.39 per dollar at 8:04 a.m. in New York, from 81.69 yesterday, after touching 82.42, the weakest level since Oct. 8. The yen depreciated 0.8 percent to 113.44 per euro, from 112.51 yesterday. The euro traded at $1.3778, compared with $1.3773, after falling to $1.3736, the lowest level since Oct. 27.
Treasuries fell, pushing the yield on the 10-year note to a seven-week high, before the Federal Reserve releases at 2 p.m. Washington time a schedule of debt purchases.
The central bank said on Nov. 3 that it will purchase $600 billion of Treasuries through June. Treasuries due in 5 1/2 years to 10 years will account for 46 percent of the purchases, according to the New York Fed. Securities maturing in 17 years to 30 years will make up 4 percent of the total.
Drop in Stocks
The MSCI World Index decreased 0.6 percent after a person with direct knowledge of the matter said China told some lenders to increase their reserve ratios by a half-percentage point
The Australian dollar dropped below parity versus the greenback, falling 0.5 percent to 99.89 U.S. cents.
The yuan advanced versus the dollar before the summit of the Group of 20 leaders who are seeking to avert a worldwide “currency war” and address global imbalances.
China’s currency appreciated as much as 0.2 percent to 6.6329 per dollar, the strongest level since China unified official and market exchange rates at the end of 1993.
The pound gained 0.5 percent to $1.6068 after losing as much as 0.2 percent to $1.5961. It dropped yesterday to its weakest level since Oct. 29. Sterling advanced for a fifth day against the euro, appreciating 0.6 percent to 85.66 pence.
While inflation will likely slow as the impact of increases in sales tax and import prices diminish, “the timing and extent of that decline in inflation are highly uncertain,” the central bank said in its quarterly inflation report released in London today. The “chances of inflation being either above or below the target by the end of the forecast period are judged to be roughly equal,” the bank said.
U.K.’s Inflation
Inflation was 3.1 percent in September, exceeding the government’s 3 percent limit for a seventh month. Governor Mervyn King has already written three letters this year to Chancellor of the Exchequer George Osborne to explain the inflation rate and there is a “high probability” he will have to write another one, the bank said today.
The euro fell against the dollar as a Portuguese sale of 2020 bonds today attracted bids equivalent to 2.1 times the amount on offer, down from a so-called bid-to-cover of 4.9 times in September.
ECB President Jean-Claude Trichet, who speaks today in Lyon, France, signaled on Nov. 4 that the central bank intends to outline possible steps to withdraw non-standard aid next month as some policy makers warn loose monetary policy risks triggering inflation.
‘Renewed Uncertainty’
“The recovery we saw in the euro was largely down to Germany, and the periphery didn’t really get a look in,” said Neil Mellor, a currency strategist in London at Bank of New York Mellon Corp., the world’s biggest custodian of financial assets. “The implication was that any renewed uncertainty would seriously undermine the euro. That’s exactly what has happened, and it’s not hard to understand.”
LCH Clearnet Ltd., the world’s second-largest fixed-income clearing house, said it will raise margin payments for customers trading Irish government bonds. The move comes as concern grows that Ireland’s bank bailouts have made the national debt burden unsustainable.
