BLBG:Dollar Weakens as Manufacturing Growth Signs Sap Safety Bid; Aussie Rises
The dollar declined the most in two weeks against the euro as signs that manufacturing is expanding in the U.S. and China damped the appeal of safer assets.
The greenback weakened versus all of its 16 major counterparts before a U.S. report that economists said will show manufacturing grew at the fastest pace in six months, after data this week showed gains in gauges for China and India. The euro climbed from an 11-year low versus the yen after German unemployment fell more than forecast. The Australian and New Zealand dollars strengthened for a fourth day as a stock rally increased demand for higher-yielding assets.
“The dollar is weaker as risk appetite improves,” said Sebastien Galy, a senior foreign-exchange strategist at Societe Generale SA in London. “The data out of China and India was slightly better than expected, and that likely provided a risk- on start to the year.”
The dollar fell 0.8 percent to $1.3032 per euro at 7:18 a.m. in New York after dropping as much as 1 percent, the biggest intraday decline since Dec. 20. The U.S. currency declined 0.2 percent to 76.72 yen. The euro gained 0.5 percent to 99.98 yen after falling to 98.66 yesterday, the weakest level since December 2000.
The Stoxx Europe 600 Index (SXXP) gained 0.6 percent, and futures on the Standard & Poor’s 500 Index (SXXP) climbed 1.7 percent.
The Institute for Supply Management will say its U.S. factory index (NAPMPMI) rose to 53.4 in December from 52.7 in the previous month, according to a Bloomberg News survey before today’s data. Bookings for factory goods (TMNOCHNG) climbed 2 percent in November after a 0.4 percent drop in the previous month, a separate survey showed before the Commerce Department figures tomorrow.
‘Solid Outcomes’
“In the immediate future, we will be looking for solid outcomes” in U.S. data, said Greg Gibbs, a foreign-exchange strategist at Royal Bank of Scotland Group Plc in Sydney. This will “provide a bit of support for other riskier currencies.”
China’s purchasing managers’ index for manufacturing increased to 50.3 last month from 49 in November, the logistics federation said Jan. 1. The reading exceeded all forecasts in a Bloomberg survey. India’s PMI for manufacturing rose to the highest in six months, HSBC Holdings Plc and Markit Economics said yesterday.
“If the world economy, in particular the key Asian economies, can avoid a really sharp slowdown in growth, some of the currencies that are more sensitive to that global story are probably going to hold up fairly well,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. in Singapore. “The risk is obviously that you start to see the U.S. dollar come under a little bit of pressure.”
Dollar Index (DXY)
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, dropped 0.7 percent to 79.753.
The dollar has fallen 0.5 percent in the past week, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The greenback gained 1.1 percent last year, snapping two years of losses. The euro was the worst performer in 2011, sliding 2 percent.
The euro extended gains after the Nuremberg-based Federal Labor Agency said German unemployment fell in December more than economists forecast. The number of people out of work slid a seasonally adjusted 22,000 to 2.89 million, the agency said. Economists forecast a drop of 10,000, a Bloomberg survey showed.
Aussie, Kiwi
The Australian dollar appreciated to a three-week high and the New Zealand currency climbed to the most since November as stocks rallied.
“There’s a bit of optimism and a bit of risk appetite coming into the early part of the new year,” said Thomas Averill, managing director in Sydney at Rochford Capital, a currency and interest-rate risk-management company. “For the next week or so, they’re going to be fairly well supported,” he said, referring to the Australian and New Zealand currencies.
Australia’s dollar rose 1.3 percent to $1.0364 after climbing to $1.0369, the strongest since Dec. 8. The New Zealand dollar advanced 1.3 percent to 78.85 U.S. cents. It reached 78.90 cents, the most since Nov. 14.
Gains in the euro were tempered on concern the European debt crisis will hamper economic growth in the region.
European services and manufacturing output shrank for a fourth month in December, according to a Bloomberg survey before a report from London-based Markit Economics tomorrow. The data will confirm a composite index (ECPMICOU) based on a survey of purchasing managers rose to 47.9 in December from 47 in November, below the 50 that indicates contraction, economists predict.
‘Difficult Position’
“This really puts them in a difficult position trying to control their budgets with weak growth and also being forced to conduct austerity measures,” RBS’s Gibbs said. “You would continue to see the euro under some pressure.”
Futures traders last week boosted bets the euro will weaken. The number of wagers made by hedge funds and other large speculators betting on a drop in the 17-nation currency increased to 127,879 contracts more than those anticipating a gain, according to the Washington-based Commodity Futures Trading Commission.
European inflation slowed from the fastest pace in three years in December, according to a Bloomberg survey before a report tomorrow. The inflation rate (ECCPEST) in the 17-nation euro area fell to 2.8 percent in December from 3 percent in the previous month, the European Union’s statistics office in Luxembourg is forecast to say.
To contact the reporters on this story: Keith Jenkins in London at kjenkins3@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
