The dollar fell against most of its major counterparts before U.S. data today forecast to show industrial production rose and confidence among homebuilders increased, reducing demand for safer assets.
The euro gained versus the greenback for a second day after a hedge-fund manager on a creditors’ committee for Greece said yesterday the country is nearing a deal on its debt. Greek Prime Minister Lucas Papademos will resume negotiations with private bondholders today. Australia’s dollar traded near the highest level in 11 weeks before a report tomorrow that may show the country’s employers added jobs in December.
“The U.S. economy is showing signs of recovery,” said Thomas Averill, managing director in Sydney at Rochford Capital, a currency and interest-rate risk-management company. Haven currencies including the dollar and the yen “will come under a bit more pressure” over the next 12 months, he said.
The dollar weakened 0.3 percent to $1.2777 per euro at 2:28 p.m. in Tokyo from New York yesterday. The yen slid 0.1 percent to 97.97 per euro, following a 0.6 percent decline yesterday. The dollar was at 76.68 yen from 76.83.
Output at U.S. factories, mines and utilities probably increased 0.5 percent in December after a 0.2 percent drop in the prior month, according to the median estimate of economists in a Bloomberg News survey before the Federal Reserve releases the figures. The National Association of Home Builders/Wells Fargo index of builder confidence is projected to rise to 22 this month, a separate poll shows. That would be the highest since May 2010 and an increase from December’s figure of 21.
Debt Negotiations
Greece will resume talks today with the Institute of International Finance, which represents private creditors. The Washington based IIF broke off negotiations last week after failing to agree with the government about how much money investors will lose by swapping their bonds.
Demand for the euro increased as Bruce Richards, chief executive officer of New York-based Marathon Asset Management LP, said Greece is nearing a deal with bondholders that would give them cash and securities with a market value of about 32 cents per euro of government debt.
“I’m highly confident the deal will get done,” Richards said in a telephone interview yesterday with Bloomberg Businessweek. Marathon is on the committee of 32 private creditors.
Shorting the Euro
Futures traders last week increased bets to a record that the euro would weaken against the dollar. The difference between wagers that the shared currency will fall versus those that it will rise -- so called net shorts -- surged to 155,195 in the week ended Jan. 10, data from the Commodity Futures Trading Commission showed on Jan. 13.
“Because short positions have accumulated, there is an unwinding of these positions,” said Toshiya Yamauchi, a senior currency analyst in Tokyo at Ueda Harlow Ltd., which provides foreign-exchange margin trading services. “Only expectations are supporting the euro, including one that Greece’s debt-swap deal will be settled somehow.”
Fitch Ratings joined Standard & Poor’s in warning that Greece will fail to fully honor a bond payment, adding to concern that a first sovereign default in the euro area will further undermine investor confidence in the common currency.
Greek Default
“The so-called private sector involvement, for us, would count as a default,” Fitch Managing Director Edward Parker said yesterday in an interview. “So it won’t be a surprise when the Greek default actually happens and we expect it one way or the other to be relatively soon.”
Moritz Kraemer, S&P’s managing director of European sovereign ratings, said a day earlier that “Greece will default very shortly” because the proposed debt swap is considered a default.
The euro has weakened 4.1 percent over the past six months, according to Bloomberg Correlation-Weighted Indexes. The yen has risen 8.6 percent, the best performance among the 10 currencies tracked by the gauges. The dollar advanced 6.7 percent.
“The possibility is rising that a Greek default will become a reality,” said Koji Iwata, a vice president in New York at Mizuho Corporate Bank Ltd., a unit of Japan’s third- biggest banking group by market value. “Concerns about the euro have yet to disappear, so it isn’t going to have a big rebound.”
Portugal is due to offer bills today maturing in 91, 182 and 336 days, after Spain yesterday auctioned 12-month debt at an average yield of 2.049 percent, compared with 4.05 percent at a sale on Dec. 13. Greece sold 1.625 billion euros ($2.1 billion) of 13-week bills yesterday with a yield of 4.64 percent, down from 4.68 percent on Dec. 20.
Aussie Dollar
The Australian dollar advanced for a second day before government data forecast to show the number of people employed in Australia rose by 10,000 last month after a decline of 6,300 in November. The jobless rate is projected to remain unchanged at 5.3 percent, according to the median of economists’ estimates in a Bloomberg survey.
“We could get a lift in the short term for the Aussie on the back of the jobs data, which is likely to be relatively strong,” said Jim Vrondas, a manager at the online foreign- exchange dealer OzForex Ltd. in Sydney. “When risk comes on the table again, the Aussie will go higher, but that would probably be a good opportunity to sell.”
The so-called Aussie strengthened 0.1 percent to $1.0391. It rose as high as $1.0450 yesterday, the strongest level since Nov. 1.
-- With assistance from Candice Zachariahs in Sydney and Mika Otsuka in New York. Editors: Benjamin Purvis, Jonathan Annells
To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
