BLBG:Dollar, Yen Set for Weekly Loss Versus Euro as U.S. Data Point to Recovery
The dollar and yen headed for weekly losses against most major peers amid U.S. data pointing to recovery in the world’s biggest economy, reducing demand for refuge assets.
The greenback touched a two-week low versus Europe’s currency before a report forecast to show sales of existing U.S. homes rose to the highest in 1 1/2 years. The 17-nation euro strengthened yesterday as Spain and France sold bonds at lower yields in their first sales of medium and long-term debt since being downgraded by Standard & Poor’s. Greece heads into a third day of talks with private creditors on a debt-swap plan.
“The good U.S. economic figures are positive for risk sentiment, resulting in the selling of the dollar and yen,” said Kengo Suzuki, a foreign-exchange strategist in Tokyo at Mizuho Securities Co., a unit of Japan’s third-biggest listed bank by market value. “People are adjusting their positions while saying it’s ‘risk on.’”
The dollar slid 0.1 percent to $1.2977 per euro as of 6:40 a.m. in London from $1.2968 yesterday in New York. It earlier touched $1.2981 against the common currency, the weakest level since Jan. 4. The yen fetched 100.07 per euro from 99.99 after earlier dropping to 100.13, also the lowest since Jan. 4. The U.S. currency traded little changed at 77.13 yen.
The dollar has fallen 2.3 percent versus the euro since Jan. 13, and the yen has lost 2.6 percent. The declines would be the biggest for both the U.S. and Japanese currencies since the week ended Oct. 14.
U.S. Recovery
Purchases of existing homes in the U.S. probably climbed 5.2 percent to a 4.65 million annual pace last month, the most since May 2010, according to the median estimate of economists in a Bloomberg News survey before the National Association of Realtors releases the figures today.
Data yesterday showed American initial jobless claims slid to the lowest level since April 2008 and a Federal Reserve report on Jan. 18 signaled an expansion in factory output.
U.S. gross domestic product probably rose at a 3 percent annual rate in the final quarter of 2011, up from a 1.8 percent gain in the previous three-month period, a separate poll showed ahead of a Jan. 27 report from the Commerce Department. That would be the most since the second quarter in 2010.
“Strong U.S. numbers are likely to further boost equity prices,” said Noriaki Murao, a New York-based managing director at Bank of Tokyo Mitsubishi UFJ Ltd. “The bias is for the markets to be risk on, and that may accelerate euro buying.”
The MSCI (MXAP) Asia Pacific Index of shares gained 1.2 percent, on poised for a fifth weekly advance.
The euro has strengthened 0.8 percent over the past week, according to Bloomberg Correlation-Weighted Indexes. The yen has weakened 2 percent, the worst performance among the 10 currencies tracked by the gauges. The dollar lost 1.8 percent.
Debt Sales
France and Spain sold 14.6 billion euros ($18.9 billion) of bonds yesterday with lower funding costs. The sales came after S&P on Jan. 13 stripped France of its AAA rating and cut Spain by two levels to A. Spain has exceeded its maximum targets in all its bond auctions since Dec. 13.
Greece’s Finance Minister Evangelos Venizelos said yesterday progress was made in debt-swap talks with officials from the Institute of International Finance in Athens and discussions will continue today.
Demand for the euro was limited after S&P said European companies’ debt-default rates will probably rise in 2012 as economies shrink and tighter bank lending curbs financing.
Debt-Default Rates
About 6.1 percent of companies in Europe whose credit ratings are lower than investment grade are likely to default this year, S&P said in a report released yesterday in Frankfurt. That compares with a default rate of 3.1 percent in the fourth quarter of 2011.
The economy of the euro area may contract 0.3 percent this year, the World Bank said on Jan. 17.
“Considering the economic situation and monetary policy, there will be downward pressure on the euro,” said Daisaku Ueno, a foreign-currency strategist at UBS AG in Tokyo.
The Australian and New Zealand dollars were poised for a fifth weekly advance as a reading of a purchasing managers’ index indicated a third month of manufacturing contraction in China, boosting the case for policy makers in the world’s second-largest economy to loosen credit controls.
The preliminary January reading of 48.8 for a PMI released by HSBC Holdings Plc and Markit Economics today compares with a final 48.7 number for December. The dividing line between contraction and expansion is 50.
China is Australia’s largest trading partner and New Zealand’s second-biggest export destination.
Australia’s currency traded at $1.0423 from $1.0419 yesterday, set for a 1 percent weekly advance. The so-called Aussie fetched 80.39 yen from 80.34 yen. New Zealand’s dollar traded at 80.30 U.S. cents from 80.29 cents and has risen 1 percent since Jan. 13. It was at 61.93 yen from 61.91 yen.
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.
