BLBG: Dollar Weakens Versus All of Its Major Peers; Aussie, N.Z. Currenies Climb
The dollar fell the most more than a month against the euro as signs manufacturing is expanding in the U.S. and China damped the appeal of safer assets.
The greenback weakened versus all of its most-traded peers after a U.S. factory gauge grew at the fastest in six months. Data earlier this week showed gains in factory indexes for China and India. The euro advanced from an 11-year low versus the yen after German unemployment fell more than forecast. Australia’s and New Zealand’s dollars rose to the strongest since November.
“One of the factors that’s undermining the dollar today is a reversal of year-end trades into the safe haven of the dollar,” 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. “It’s helping reverse international equities and cause some dollar softness right now.”
The dollar fell 0.9 percent to $1.3045 per euro at 10:50 a.m. in New York after dropping as much as 1 percent, the biggest intraday decline since Nov. 30. The U.S. currency declined 0.2 percent to 76.78 yen. The euro gained 0.7 percent to 100.15 yen after falling to 98.66 yesterday, the weakest level since December 2000.
The Standard & Poor’s 500 Index (SXXP) climbed 2 percent, and the Stoxx Europe 600 Index (SXXP) gained 1.2 percent.
ISM Data
The Institute for Supply Management’s factory index rose to 53.9 in December from 52.7 a month earlier, the Tempe, Arizona- based group’s data showed today. Fifty is the dividing line between growth and contraction, and economists surveyed by Bloomberg News projected the gauge would climb to 53.5.
“You get a good number like this and it continues” the trend, said Fabian Eliasson, head of U.S. currency sales at Mizuho Financial Group Inc. in New York. “The dollar is falling off, and it’s a little bit more risk-on.”
Brazil’s real gained the most against the dollar among its 16 major counterparts tracked by Bloomberg, adding 1.8 percent to 1.8378. Mexico’s peso appreciated 1.6 percent to 13.7013 per dollar.
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.
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 79.684.
The dollar has fallen 0.7 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.
U.S. employers added 150,000 jobs in December, compared with an increase of 120,000 in November, according to the median estimate of 72 economists in a Bloomberg News survey. The Labor Department will release the report Jan. 6.
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.
Basis Swaps
The cost for European banks to borrow in dollars tumbled to the lowest level in two months, according to a money-markets indicator. The three-month cross-currency basis swap, the rate banks pay to convert euro interest payments into dollars, touched 1.05 percentage points below the euro interbank offered rate, the least expensive since Nov. 9 on an intraday basis, according to data compiled by Bloomberg. It closed yesterday at negative 1.14 points.
The Australian and New Zealand currencies climbed as equities 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 strengthened 1.4 percent to $1.0374 after climbing to $1.0386, the highest level since Nov. 9. The New Zealand dollar advanced 1.4 percent to 78.94 U.S. cents. It reached 79.01 cents, the most since Nov. 14.
European Crisis
Gains in the euro were tempered by 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 tomorrow from London-based Markit Economics. 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.
“This really puts them in a difficult position trying to control their budgets with weak growth and also being forced to conduct austerity measures,” said Greg Gibbs, a foreign- exchange strategist at Royal Bank of Scotland Group Plc in Sydney. “You would continue to see the euro under some pressure.”
Futures traders (.ECLRG) 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 a record 127,879 contracts more than those anticipating a gain, according to the Washington-based Commodity Futures Trading Commission.
To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Keith Jenkins in London at kjenkins3@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
