BLBG; Dollar Advances Against Major Peers as Commodities, Stock Markets Decline
The yen strengthened against all of its most-traded peers as investors sought the safety of the Japanese currency amid slumping equities and commodity prices.
China raised banks’ reserve requirements for the fifth time this year to restrain prices, adding to the likelihood that growth will slow in the world’s second-biggest economy. The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, climbed to the highest in three weeks as the Stoxx Europe 600 Index slid 1.2 percent. The Swiss franc gained as oil fell. The euro dropped versus the dollar on bets Greece may have to restructure debt.
“After a spring of resilient risk appetite, there is now this feel that the market is coming down to earth,” said Jane Foley, a senior currency strategist at Rabobank International in London. “We’ve seen the Swiss franc, the yen -- the normal safe havens -- do better.”
The yen appreciated 0.2 percent to 80.89 per dollar, as of 7:17 a.m. in New York. Against the euro, the Japanese currency gained 0.5 percent to 114.51 yen, after reaching 114.19, the strongest level since March 28. The European common currency fell 0.2 percent to $1.4159 and traded at 1.2579 Swiss francs from 1.2599.
Global investors have tempered their optimism about the U.S. and world economies and plan to put more of their money in cash and less in commodities over the next six months, a Bloomberg survey found. Thirty percent of those questioned intend to reduce investments in commodities, according to a quarterly poll of 1,263 investors, analysts and traders.
Reserve Ratios
Oil declined after the International Energy Agency trimmed its 2011 global oil demand forecast for the first time as this year’s price rally begins to weigh on consumption.
Reserve ratios will increase 0.5 percentage point from May 18, the People’s Bank of China said on its website today. The requirements currently stand at 20.5 percent for the biggest lenders.
The Dollar Index rose 0.3 percent to 75.513 as the U.S. currency strengthened 1.1 percent versus the Australian dollar and 0.8 percent against the South African rand.
“With risk coming off, the dollar inevitably will see a reversal from some of the losses it’s had,” said Neil Mellor, a currency strategist at Bank of New York Mellon Corp. in London. “It’s not just the euro-zone concerns; it’s generally a fear that over the months coming we might get a further period of consolidation. There are signs that perhaps the bubble that has formed in commodity prices is going to deflate, so all of these are coming together.”
European Debt Risk
The Norwegian central bank will raise its overnight deposit rate to 2.25 percent today, according to 15 of the 20 economists surveyed by Bloomberg News, while five expect no change. The krone appreciated 0.2 percent to 7.8135 per euro before the Norges Bank decision at 2 p.m. local time in Oslo.
The euro slid to a five-week low against the greenback as European Union Economic and Monetary Affairs Commissioner Olli Rehn said a Greek debt restructuring would have “devastating implications.”
Officials from the EU, European Central Bank and International Monetary Fund yesterday began their fourth evaluation of Greece’s economy. Rehn said the delegation will need “a few weeks” to determine Greece’s financing needs and the potential size of any new aid package.
“With so many comments coming out and so much uncertainty on Greece, the risks are to the downside at the moment,” said Chris Walker, a currency strategist at UBS AG in London.
Australian Unemployment
Australia’s dollar dropped for a second day as investors trimmed bets on central-bank rate increases after employment dropped by the most since 2009.
The number of people employed in Australia declined by 22,100, following a 43,300 gain in March, the statistics bureau said. The jobless rate held at 4.9 percent.
“With high fuel prices, a strong currency and concerns about taxation, you get the sense that this mixture of negatives is beginning to weigh on the manufacturing states,” said Robert Rennie, chief currency strategist in Sydney at Westpac Banking Corp. “Today’s data takes a bit of the shine and mystery off the Aussie dollar.”
Australia’s currency dropped 1.1 percent to $1.0581, and slid 1.4 percent to 85.56 yen.
To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net.
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.
