BLBG: Canadian Dollar Rallies on Inflation Report, Eased European Debt Concern
The yen and dollar rallied versus their major counterparts on bets U.S. lawmakers will announce that a congressional committee failed to agree on deficit cuts, boosting demand for haven assets.
The euro dropped against the yen following last week’s biggest loss since September as Spain’s Socialists became the fifth European government to be ejected because of the region’s debt crisis. The pound fell for the first time in three days against the dollar as home sellers cut asking prices. Australia’s dollar decreased to the lowest in five weeks on reduced demand for higher-yielding assets.
“It’s the uncertainty and the lack of any near-term resolution to either the U.S. or European debt crises,” said Michael Woolfolk, senior currency strategist in New York at Bank of New York Mellon Corp., the world’s largest custodial bank, with more than $26 trillion in assets under administration. “That’s the cloud hanging over the market right now. It’s a risk-off scenario that’s boosting the safe-haven appeal of the dollar and yen.”
The yen appreciated 0.4 percent to 103.56 per euro at 9:08 a.m. New York time, following last week’s 2 percent gain. Japan’s currency was little changed at 76.84 against the dollar. The dollar rose 0.4 percent to $1.34771 per euro.
The Stoxx Europe 600 Index of shares slipped for a third day, losing 1.9 percent, while Standard & Poor’s 500 Index futures decreased 1.2 percent.
The pound dropped versus its U.S. counterpart, falling 1 percent to $1.5644, after touching $1.5613, the least since Oct. 12. Sterling slid 0.7 percent to 86.15 pence against the euro.
England’s Housing
Average asking prices in England and Wales fell 3.1 percent this month in the biggest decrease since November 2010, Rightmove Plc (RMV), the operator of Britain’s biggest property website said in a report published in London today.
The Australian dollar slid 1.1 percent to 98.96 U.S. cents, after earlier touching 98.66, the lowest since Oct. 12. It dropped for a sixth day against the yen, its longest losing streak since May, tumbling 1.2 percent to 76.04. New Zealand’s currency, nicknamed the kiwi, lost 0.8 percent to 75.04 U.S. cents and was 0.9 percent weaker at 57.66 yen.
China’s yuan was little changed at 6.3616 versus the U.S. dollar after Premier Wen Jiabao told U.S. President Barack Obama that his country will push forward with exchange-rate reform.
Policy makers will move to allow more flexibility in an active, gradual and controllable manner, the official China Central Television cited Wen as telling Obama on Nov. 19 at a summit of Asian leaders in Bali, Indonesia.
Dollar Index
IntercontinentalExchange Inc.’s Dollar Index, used to track the currencies of six major U.S. trading partners, increased 0.4 percent to 78.335 on demand for a refuge.
Foreign bank deposits at the Federal Reserve have more than doubled to $715 billion from $350 billion since the end of 2010 amid Europe’s debt turmoil, buttressing the dollar’s status as the world’s reserve currency.
Forty-seven non-U.S. banks held balances of more than $1 billion at the New York Fed as of Sept. 30, up from 22 at the end of 2010, according to a survey of 80 financial institutions by ICAP Plc, the world’s largest inter-dealer broker. The dollar has appreciated 7.2 percent since Standard & Poor’s cut the nation’s AAA credit rating Aug. 5, the second-best performance after the yen among developed-nation peers, according to Bloomberg Correlation-Weighted Currency Indexes.
No Supercommittee Agreement
The 12-member U.S. bipartisan supercommittee will probably announce today it can’t agree on deficit savings, a Democratic Party aide said. The aide, who wasn’t authorized to discuss internal matters publicly and requested not to be identified, said in an e-mail message that it was highly unlikely that the committee’s talks could be salvaged.
“The fear is that you get a credit downgrade if you get the U.S. reneging on some of the automatic cuts for 2013,” Alan Ruskin, global head of Group-of-10 foreign-exchange strategy at Deutsche Bank AG in New York, said in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “That becomes extremely serious.”
In Spain’s elections, People’s Party leader Mariano Rajoy won, beating the Socialist Party’s candidate Alfredo Perez Rubalcaba. Rajoy, who said on Nov. 18 he hoped Spain wouldn’t need a bailout before his government takes over in a month’s time, has pledged to cut the budget deficit and regain the nation’s AAA credit rating.
France’s 10-year bond yield jumped as much as 14 basis points, or 0.14 percentage point, to 3.61 percent after Moody’s Investors Service said higher financing costs are increasing fiscal challenges for the AAA rated nation. It later erased the increase to yield 3.45 percent.
12-Month Decline
The euro has fallen 2.2 percent over the past 12 months, Bloomberg Correlation-Weighted Indexes show, as slumping government bonds spurred concern the region’s debt crisis is spreading to bigger nations, including Italy and France. The yen has climbed 7 percent during that period.
Europe’s economic standstill is “bound to slow down the improvement of public finances,” European Union Economic and Monetary Affairs Commissioner Olli Rehn said in the text of a speech today in Brussels.
“My main assumptions for the euro are to the downside,” said Ulrich Leuchtmann, head of currency strategy at Commerzbank AG in Frankfurt.
To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net
To contact the editors responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
