BLBG:Dollar, Yen Set for Weekly Loss Versus Euro as U.S. Data Point to Recovery
The dollar and yen headed for weekly decline as U.S. reports suggesting the world’s biggest economy is gaining momentum, reduced demand for safer assets.
The dollar reached a two-week low versus the euro before a report forecast to show sales of existing U.S. homes rose to the highest since May 2010. The 17-nation euro headed for its biggest weekly gain versus dollar in three months after Spanish and French borrowing costs fell yesterday at their first auctions of medium and long-term debt since being downgraded by Standard & Poor’s. Greece today starts a third day of talks with private creditors on a debt-swap plan.
“The U.S. data is better and that is a huge relief for everybody at the moment,” said Jane Foley, a senior currency strategist at Rabobank International in London. “The yen and the dollar are coming under some pressure.”
The yen was little changed at 99.96 per euro at 8:31 a.m. London time, having dropped 2.4 percent this week. The dollar was little changed at $1.2952 per euro after falling to $1.2986 earlier today, the lowest since Jan. 4. The greenback fell 2.1 percent versus the euro this week. The dollar gained 0.1 percent to 77.21 yen.
This week’s declines for the dollar and yen versus the euro are the biggest since the period ended Oct. 14.
U.S. Recovery
Purchases of existing U.S. homes climbed 5.2 percent to a 4.65 million annual pace last month, the most since May 2010, according to a Bloomberg News survey before the National Association of Realtors report today. Data yesterday showed U.S. initial jobless claims slid to the lowest since April 2008.
U.S. gross domestic product 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 survey showed before a Jan. 27 report from the Commerce Department. That would be the most since the second quarter in 2010.
“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 euro has strengthened 0.7 percent over the past week, according to Bloomberg Correlation-Weighted Indexes. The yen weakened 1.9 percent, the worst performance among the 10 developed-nation currencies tracked by the gauges. The dollar lost 1.6 percent.
Debt Sales
France and Spain sold 14.6 billion euros 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.
Greek 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 tempered after S&P said yesterday that European companies’ debt-default rates will probably rise in 2012 as economies shrink and tighter bank lending curbs financing.
About 6.1 percent of companies in Europe whose credit ratings are lower than investment grade may default this year, S&P said. 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.
‘Downward Pressure’
“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 headed for a fifth week of gains as 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 today by HSBC Holdings Plc and Markit Economics 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 gained 0.9 percent this week to $1.0415. It was little changed today. New Zealand’s dollar also advanced 0.9 percent this week to 80.18 U.S. cents. The so- called kiwi dropped 0.2 percent today.
To contact the reporters on this story: Emma Charlton in London at echarlton1@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
