BLBG:Dollar Remains Lower Before U.S. Factory Orders
The dollar declined before a government report forecast to show U.S. factory orders rebounded in February, adding to signs of a recovery and sapping demand for the relative safety of the world’s reserve currency.
The Dollar Index (DXY) fell to a one-month low before the Federal Open Market Committee releases minutes from its March 13 meeting. The euro approached a one-month high against the greenback after a German parliamentary leader said there’s no need to discuss a bailout for Spain. Australia’s currency weakened after the nation’s central bank signaled a willingness to ease policy further.
“The U.S. economic news, because it has been better, is promoting some risk appetite,” and undermining the dollar, said Michael Derks, chief strategist at FXPro Financial Services Ltd. in London. “For now the market is minded to focus on the more positive developments. The euro is less vulnerable against the dollar than it was a month ago and there’s also a suspicion that the FOMC minutes might show a bias toward further easing.”
The dollar declined 0.1 percent to $1.3335 per euro at 9:45 a.m. London time. The U.S. currency was little changed at 82.05 yen, and earlier touched 81.56, the weakest since March 9. The yen retreated 0.1 percent to 109.44 per euro.
Dollar Index
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, fell 0.2 percent to 78.776. It touched 78.685, the weakest since March 1.
Orders (TMNOCHNG) at U.S. factories probably rose 1.5 percent in February after a 1 percent drop a month earlier, according to the median estimate of economists in a Bloomberg News survey. The Commerce Department releases the figures today.
Strong U.S. data are “certainly helping global growth in terms of stability in economic outlook,” said Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney. “The U.S. dollar tends to generally underperform in that environment.”
The FOMC will release today minutes of its March 13 meeting when policy makers raised their assessment of the economy while repeating that “exceptionally low” interest rates may be needed through late 2014. The bank bought $2.3 trillion of debt in two rounds of quantitative easing, or QE, between December 2008 and June 2011.
Signs of Improvement
“With signs of an improving economy, the market is still trying to access how committed they are, as well as the possibility of QE3,” Emma Lawson, a Sydney-based currency strategist at National Australia Bank Ltd. (NAB), wrote in a research note today. “Less acknowledgement of the recovery is likely to see the U.S. dollar lower and equity markets higher.”
The Frankfurt-based European Central Bank will keep its benchmark interest rate at 1 percent when council members meet tomorrow, according to a Bloomberg survey. That would match a record low.
The euro may be poised for further declines after dropping below a two-week trendline support at $1.3312 yesterday, according to MacNeil Curry, head of foreign-exchange and interest-rate technical strategy at Bank of America Corp.
‘Small Double Top’
The 17-nation currency may complete a “small double top” should it breach $1.3252, New York-based Curry wrote in a note yesterday. The euro last dropped to as low as $1.3252 on March 29. On a graph, a double top consists of two well-defined peaks with a moderate valley in between. A break of the neckline, the trough between the peaks, is often regarded as a bearish signal.
Spain’s government is determined to tackle its debt and there’s no need to discuss bailing out the euro area’s fourth largest economy, according to an envoy of German Chancellor Angela Merkel’s party.
“From what I see, there is no necessity at the moment for there to be any talk of Spain having to apply for aid from a rescue fund,” Volker Kauder, parliamentary leader of Merkel’s Christian Democratic bloc, said late yesterday after meeting Prime Minister Mariano Rajoy and other Spanish officials in Madrid.
The euro has advanced 0.1 percent since the start of the year, according to Bloomberg Correlation-Weighted Indexes which track 10 developed market currencies. The yen has declined 9.8 percent, making it the worst performer, and the dollar has fallen 3.1 percent.
Aussie Decline
The so-called Aussie weakened at least 0.2 percent against all of its 16 major peers after the Reserve Bank of Australia left its benchmark interest rate unchanged at 4.25 percent and signaled it may resume cutting borrowing costs as soon as next month if weaker-than-expected growth slows inflation.
It’s “prudent to see forthcoming key data on prices to reassess its outlook for inflation, before considering a further step to ease monetary policy,” the bank said in a statement.
Traders expect the RBA will cut its benchmark rate by 79 basis points over the coming 12 months, according to a Credit Suisse Group AG index based on overnight indexed swap rates.
The Australian dollar declined 0.2 percent to $1.0396 after earlier rising as much as 0.4 percent. The Aussie slid 0.2 percent to 85.32 yen.
To contact the reporters on this story: Emma Charlton in London at echarlton1@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net Kristine Aquino in Singapore at kaquino1@bloomberg.net.
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.
