BS: Dollar Reaches Six-Week High Against Yen on U.S. Recovery Signs
Nov. 16 (Bloomberg) -- The dollar reached a six-week high against the yen before a report that economists said will show U.S. industrial production expanded last month, adding to signs the nation’s recovery is gathering pace.
The dollar strengthened against the Japanese currency for a sixth straight day, the longest run since December. The euro gained against the dollar and yen after a measure of German confidence rose for the first time in seven months.
“Signs of U.S. economic recovery in the shape of stronger fundamental data are lifting the dollar,” said Geoffrey Yu, a foreign-exchange strategist at UBS AG in London. “European woes lend a natural bias to support the dollar. There’s some buying of dollars as investors unwind short positions.”
The dollar strengthened 0.3 percent to 83.28 yen at 11:04 a.m. in London from 83.07 yen in New York yesterday. It advanced to 83.33 yen earlier today, the highest level since Oct. 5. The euro gained 0.2 percent to $1.3613, after weakening earlier to $1.3561, its lowest since Sept. 30. The single currency rose 0.3 percent to 113.22 yen.
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 78.583 from 78.518 yesterday, when it reached 78.707, the highest since Oct. 1.
Industrial Production
U.S. industrial production increased 0.3 percent last month after dropping 0.2 percent in September, according to a Bloomberg News survey before today’s report. Retail sales rose 1.2 percent in October, the most in seven months, Commerce Department data showed yesterday.
Germany’s ZEW Center for European Economic Research said its index of investor and analyst expectations, which aims to predict developments six months ahead, increased to 1.8 from minus 7.2 in October. Economists expected a gain to minus 6, according to the median of 33 forecasts in a Bloomberg survey.
A separate report showed European inflation accelerated to the fastest in almost two years in October. Euro-area consumer prices rose 1.9 percent from a year earlier after increasing 1.8 percent in September, the European Union statistics office in Luxembourg said today. That’s the fastest since November 2008 and in line with an estimate published on Oct. 29.
European Union-Irish negotiations are expected to intensify today at a meeting of euro-area finance ministers in Brussels. Irish Prime Minister Brian Cowen signaled his government will talk on ways to help his country’s banking system.
Ireland may use EU aid to bail out its cash-strapped banks, the European Central Bank said yesterday, stepping up pressure on the Irish government to prevent an escalation of the debt crisis that threatens the region’s economy.
Euro Pessimism
The euro may drop should the region’s finance ministers fail to agree on a plan to assist Ireland and stabilize so-called peripheral bond markets at today’s meeting, Bank of Tokyo- Mitsubishi UFJ Ltd. said.
“If euro-zone finance minister group chairman Jean-Claude Juncker is correct and there is no plan agreed today, expect to see renewed turmoil and euro selling to intensify,” Derek Halpenny, head of European currency strategy in London, wrote in an e-mailed research note today. “The stability of the euro reflects increased optimism that the meeting will end with the announcement of some form of bailout for Ireland.”
The euro has fallen 7.6 percent this year against its 10 developed-nation counterparts, Bloomberg Correlation-Weighted Currency Indexes show. The dollar has lost 2 percent, and the yen has gained 11 percent.
UBS Forecasts
UBS, the world’s second-largest foreign-exchange trader, raised one-month forecasts for the dollar on signs of recovery in the U.S. and lingering concern about European debt.
The dollar may strengthen to $1.30 per euro in one month, compared with its previous forecast of $1.40, according to a research note dated yesterday. The U.S. currency may climb to 85 yen in one month, from a previous target of 80 yen, it said.
“Europe’s fiscal troubles are set to continue and the U.S. economy is starting to revive after summer weakness,” analysts led by Mansoor Mohi-uddin, a Singapore-based chief currency strategist at UBS, wrote in the note. “We expect investors to look more favorably on the dollar now.”
Futures traders decreased their bets that the euro will gain against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission showed yesterday.
The difference in the number of wagers by hedge funds and other large speculators on an advance in the euro compared with those on a drop -- so-called net longs -- was 23,283 on Nov. 9, compared with net longs of 38,610 a week earlier. That’s the third straight weekly decline.
Korean Won
Futures are agreements to buy or sell assets at a set price and date. The figures reflect holdings in currency-futures contracts at the Chicago Mercantile Exchange as of Tuesday.
South Korea’s won rose for the first time in three days after the Bank of Korea increased the seven-day repurchase rate by 0.25 percentage point to 2.5 percent. The central bank’s interest-rate increase was predicted by six of 13 economists surveyed by Bloomberg. The rest expected no change.
“The market is still nervous,” said Gerrard Katz, head of foreign-exchange trading at Standard Chartered Plc in Hong Kong. “It awaits any measures Korea would take to control the inflow of hot money.”
The won gained 0.2 percent to 1,129.47 per dollar.
--With assistance Monami Yui in Tokyo, Candice Zachariahs in Sydney, Jeff Black in Frankfurt, Simone Meier in Zurich and Matthew Brown and Lukanyo Mnyanda in London. Editors: Keith Campbell, Mark McCord.
To contact the reporters on this story: Keith Jenkins in London at Kjenkins3@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at tilles@bloomberg.net
