BLBG:Dollar Index Falls Before U.S. Consumer Confidence, Manufacturing Reports
The Dollar Index slipped before reports forecast to show U.S. consumer confidence and regional manufacturing gauges rose, reducing demand for haven assets.
The euro strengthened for a second day before Italy sells bills and bonds this week even as concern lingered that Europe’s debt crisis will drive up borrowing costs. Australia’s dollar snapped a five-day rally as Asian stocks slid. Thailand’s baht weakened as investors reduced holdings of the nation’s assets.
Risk-on sentiment “seems to be the side of least resistance for the moment,” said John Hardy, head of foreign- exchange strategy at Saxo Bank A/S in London. “The surprise side could be higher for euro-dollar, specifically because of heavy short positioning there. That might depend on the Italian bond auctions.”
The Dollar Index, which tracks the greenback against the currencies of six U.S. trading partners, fell 0.2 percent to 79.794 at 11:16 a.m. London time, having slid 0.2 percent last week. The euro was 0.1 percent stronger at $1.3077 and traded little changed at 101.79 yen. The dollar weakened 0.2 percent to 77.85 yen.
Australia’s currency slipped less than 0.1 percent to $1.0165. The MSCI Asia Pacific Index (MXAP) declined 0.2 percent after the Standard & Poor’s 500 Index posted a 3.7 percent jump last week. The Stoxx Europe 600 Index climbed 0.2 percent today.
The dollar has depreciated 1.3 percent in the past month, according to Bloomberg Correlation-Weighted Indexes, which tracks 10 developed-nation currencies. The so-called Aussie advanced 3.9 percent, the most among the 10, the indexes show.
Consumer Confidence
An index of consumer confidence in the U.S. rose to 58.6 this month from 56 in November, according to the median estimate of 61 economists surveyed by Bloomberg News. The New York-based Conference Board publishes the figures today.
The Federal Reserve Bank of Richmond may say the overall business activity index for the central-Atlantic region climbed to 5 in December from 0 last month, economists said. Manufacturing in Texas increased to 4.5 this month from 3.2 in November, another poll showed. Both Fed reports are due today.
“The U.S. economy is stronger than expected,” said Junichi Ishikawa, a Tokyo-based market analyst at IG Markets Securities Ltd. “That’s giving some support to stocks and risk currencies. The dollar tends to be sold in the risk-on environment.”
A “few” Bank of Japan board members said financial-market turmoil from the European debt crisis and the yen’s appreciation were increasing risks for growth, according to a record of last month’s board meeting released today.
Haven Currency
The yen tends to gain during periods of financial stress as Japan’s export-reliant economy doesn’t need foreign capital to balance current accounts -- the broadest measure of trade. The currency has strengthened against all 16 of its most-traded peers this year, strengthening 4.2 percent against the dollar and 6.6 percent versus the euro.
Japanese officials sold at least 14.3 trillion yen this year to stem gains that cut profits for exporters from Toyota Motor Corp. to Nintendo Co., and Finance Minister Jun Azumi has pledged more action. Intervention in 2012 may fail again as financial turmoil attracts investors to the world’s third-most traded currency for its low volatility.
“When avoiding losses trumps profits during a period of risk aversion, low-volatility assets are very appealing,” Masashi Murata, a currency strategist in Tokyo at Brown Brothers Harriman & Co., said in an interview on Dec. 19. “When the U.S. and Europe moved in a bad direction and people wanted to avoid risk, the yen stood as the only currency that had enough liquidity to absorb demand.”
Spain ‘Relapse’
Spain’s Economy and Competition Minister Luis de Guindos said yesterday in Madrid the nation’s economy has suffered a “relapse” and will contract as the People’s Party takes over the nation’s finances from the Socialists. “The next two quarters aren’t going to be easy,” he said.
Germany’s government is revising its forecast for 1 percent economic growth in 2012 and will present a lower figure in mid- January, Focus magazine reported, without citing anyone.
The nation’s economy ministry denied the Focus report, saying no decision has been made. An analysis of potential growth is still ongoing, a spokeswoman said in an e-mailed statement, declining to be identified, citing ministry policy.
Italy is scheduled to sell 9 billion euros of 179-day bills and as much as 2.5 billion euros of zero-coupon 2013 securities tomorrow. It will auction debt due in 2014, 2018, 2021 and 2022 the following day.
Italian Auction
Ten-year bond yields in Italy advanced 10 basis points to 7.08 percent, above the 7 percent level that spurred Greece, Ireland and Portugal to seek bailouts.
“The markets are waiting to see how much demand there’ll be for Italian debt,” said IG Markets’Ishikawa. “If the results deepen doubts about Italy’s funding ability, they will weigh on the euro.”
Thailand’s currency weakened as overseas investors sold $3.8 million more of Thai stocks than they bought yesterday, bringing this year’s net sales to $200 million, according to exchange data. The baht slid 0.5 percent to 31.43 per dollar.
To contact the reporters on this story: Lucy Meakin in London at lmeakin1@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
