BLBG:Dollar Declines as Equities Advance Saps Demand for Safety; Pound Weakens
The dollar weakened against most of its 16 major peers before data forecast to show consumer spending and new-home sales increased in the world’s largest economy, damping demand for lower-yielding assets.
Australia’s dollar rose a fourth day against the U.S. currency as stocks climbed, boosting the allure of currencies linked to global expansion. The euro was little changed against the yen after European Central Bank Executive Board member Lorenzo Bini Smaghi said policy makers shouldn’t shirk from using quantitative easing if it’s needed to avoid deflation. The pound dropped versus most major peers after a report showed U.K. service output fell the most in six months in October.
“The dollar is drifting gently lower,” said Kit Juckes, head of foreign-exchange research at Societe Generale SA in London. “Risk remains very tentatively on.”
The dollar depreciated 0.2 percent to 78.03 yen at 10:10 a.m. London time. The greenback also slipped 0.2 percent against the euro, to $1.3075, and was headed for its first weekly decline since Dec. 2. The euro was little changed against the yen at 102.01.
The MSCI Asia Pacific Excluding Japan Index (MXAPJ) of shares advanced 1.3 percent, with Japanese markets closed today for a holiday. The Stoxx Europe 600 Index of European equities was 0.6 percent stronger and futures on the Standard & Poor’s 500 Index rose 0.3 percent.
Consumer Spending
Consumer spending in the U.S. grew for a fifth month in November, increasing 0.3 percent, according to the median estimate of economists in a Bloomberg News survey before Commerce Department figures. Another report from the department may show demand for durable goods, those meant to last at least three years, rose 2.2 percent in November after a 0.5 percent decline the prior month, another survey showed.
Sales of new homes rose 2.6 percent last month, according to economist estimates.
House Speaker John Boehner yesterday agreed to extend a U.S. payroll-tax cut past its Dec. 31 expiration. Without Congressional action, the payroll tax for employees will rise to 6.2 percent in January from the current 4.2 percent.
The Australian dollar appreciated 0.2 percent to $1.0152 after climbing to $1.0219 two days ago, the strongest level since Dec. 12. It advanced as much as 0.4 percent to 79.51 yen, the highest since Dec. 8, before trading at 79.25 yen.
‘Bearish on Dollar’
“I’m bearish on the U.S. dollar against the Australian dollar, kiwi dollar, Singapore dollar, pretty much everything else,” said Thomas Averill, managing director at Rochford Capital, a currency and interest-rate risk management company in Sydney. “You may see a bit of optimism in the early part of January.”
Sterling fell against 13 of 16 major currency counterparts, weakening 0.2 percent to 83.39 pence per euro and trading little changed at $1.5684. Services, which account for about three quarters of the economy, fell 0.7 percent from September, when the industry was unchanged, the Office for National Statistics said in London today. Mortgage approvals fell last month, the British Bankers’ Association said separately today.
South Korea’s won advanced against all its 16 major counterparts as the Bank of Korea and Finance Ministry said today they will try to reduce the currency’s volatility and expand trade financing for exporters so that they can cope with the global economic slowdown.
Moody’s Investors Service said yesterday the outlook for the nation’s ratings remains stable after the death of North Korean leader Kim Jong Il. Standard & Poor’s also affirmed the country’s stable status today.
The won appreciated 0.5 percent to 1,150.20 per dollar.
European Crisis
The yen has gained 4 percent versus the dollar this year, set to be the best performing currency among its major peers. The euro has dropped 2.3 percent amid concern Europe’s prolonged debt crisis will hurt the region’s economy.
Bini Smaghi said policy makers shouldn’t shirk from using quantitative easing if deflation becomes a danger to the economy.
“I do not understand the quasi-religious discussions about quantitative easing,” Bini Smaghi, who will leave his post at the end of the month, said in an interview published yesterday by the Financial Times. The ECB confirmed the comments. “It is appropriate if economic conditions justify it, in particular in countries facing a liquidity trap that may lead to deflation.”
To contact the reporters on this story: Paul Dobson in London at pdobson2@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
