BLBG: Dollar, Yen Decline as Stocks Increase Reflects Reduced Demand for Refuge
The dollar and yen fell against most of their major counterparts as stocks and commodities rose amid reduced demand for haven assets.
The euro trimmed a weekly decline against the dollar after Luxembourg’s Jean-Claude Juncker said Europe should meet a deadline for arranging loans with the International Monetary Fund as part of a crisis-fighting package. New Zealand’s dollar, nicknamed the kiwi, rose the most among the 16 major currencies tracked by Bloomberg.
“It seems like it’s a bit more of a risk-on day,” said Fabian Eliasson, head of U.S. currency sales at Mizuho Financial Group Inc. in New York. “The euro has advanced pretty well, as well as the pound, Aussie and kiwi.”
The dollar fell 0.2 percent to $1.3044 per euro at 11:27 a.m. in New York. It dropped 0.3 percent to 77.63 yen. The Japanese currency strengthened 0.1 to 101.25 per euro.
The Standard & Poor’s 500 Index advanced 0.9 percent and the Thomson Reuters/Jefferies CRB Index of raw materials added 0.3 percent.
The dollar has appreciated 1.6 percent this year against nine developed-nation counterparts, according to Bloomberg Correlation-Weighted Indexes. The yen has advanced 5 percent and the euro has dropped 0.8 percent.
Aussie, Kiwi
The New Zealand currency, also known as the kiwi, climbed 1.4 percent to 76.40 U.S. cents. The Australian dollar advanced 0.7 percent to 99.88 U.S. cents.
The Indian rupee extended its rally from an all-time low reached yesterday as the Reserve Bank of India announced measures to curb speculation in the foreign-exchange market. The currency appreciated 1.7 percent to 52.74 per dollar after touching the all-time low of 54.3050 yesterday.
“The RBI has taken decisive measures to reduce onshore speculation against the rupee,” said Olivier Desbarres, head of regional foreign-exchange strategy at Barclays Plc in Singapore. “These measures have certainly caught the market’s attention, and it reduces the chances of a rapid weakening.”
Italy’s Prime Minister Mario Monti survived a vote on his budget plan. Juncker, who leads the group of euro-area finance ministers, also said he will decide today whether to call a meeting of the group next week to discuss the debt crisis.
European Developments
“There’s been some news with respect to comments from Juncker,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto. “That and the confidence vote being survived by Monti earlier this morning and the inability for the euro to trade through $1.30 with any sustainability whatsoever overnight have put a bid to euro.”
Italy’s Monti won a confidence vote on his 30 billion-euro ($39 billion) emergency budget plan, which will speed final passage of the measure that aims to spur growth and convince investors he can cut Europe’s second-biggest debt.
The ECB is purchasing the bonds of debt-strapped nations such as Italy and Spain after they agreed to implement austerity measures to improve their finances.
Before this month, the euro remained relatively supported even amid the sovereign-debt crisis. The currency’s relative strength came as European investors brought back money held in foreign assets, Fred Goodwin, a strategist at State Street Corp., said in an interview on Bloomberg Radio’s “Bloomberg Surveillance” with Tom Keene and Ken Prewitt.
Funding Response
“We’ve seen a difficulty for euro banks and financial institutions to fund their dollar positions,” Goodwin said. “One response to that is to simply unwind those dollar-funded positions and bring money back home and that’s one thing that has helped give the euro some strength.”
European portfolio managers brought home 65.9 billion euros ($85.8 billion) in August and 11.6 billion euros in September, higher than the 12-month average of 629 million euros in inflows, according to European Central Bank data compiled by Bloomberg.
The three-month cross-currency basis swap, the rate banks pay to convert euro payments into dollars, was 122 basis points below the euro interbank offered rate, 18 basis points lower than yesterday’s 140 basis points. The measure reached 162 in November, which was the highest level since October 2008.
The cost of living in the U.S. stagnated last month as gasoline prices dropped, supporting the Federal Reserve’s view that inflation remains in check.
The unchanged reading in the consumer-price index last month followed a 0.1 percent decline the prior month, a report from the Labor Department showed today in Washington. That compares with a 0.1 percent increase forecast in a Bloomberg News survey of 82 economists.
The Fed’s policy-setting panel said on Dec. 13 the economy “has been expanding moderately,” compared with the Nov. 2 assessment that growth “strengthened somewhat.”
The Dollar Index (DXY), which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, declined 0.2 percent to 80.114.
To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
