BLBG:Dollar Falls From 4-Month High Versus Euro; Yen Declines
The dollar retreated from a four- month high against the euro after minutes from the last Federal Open Market Committee meeting showed some policy makers said further easing may be needed should the economy lose momentum.
The yen weakened against the majority of its 16 major peers amid speculation the Bank of Japan (8301) may add stimulus next week. Governor Masaaki Shirakawa said today it’s important for the central bank to support growth. Demand for the euro was limited as Greece’s leaders prepare for a second election, with the nation’s future in the currency bloc and an international bailout at stake. The Australian and New Zealand dollars strengthened, snapping four-day declines.
“There’s a sign from the FOMC that they can see the possibility of more policy combination if certain conditions are met,” said Joseph Capurso, a Sydney-based strategist at Commonwealth Bank of Australia. (CBA) “That means the U.S. dollar may start to stabilize rather than continue to rocket higher. It’s going to give people a bit more of a reason to pause before they pile into U.S. dollars.”
The dollar fell 0.2 percent to $1.2739 per euro as of 6:31 a.m. in London from yesterday, when it climbed to $1.2681, the strongest since Jan. 17. The yen slid 0.1 percent to 102.25 per euro from yesterday, when it touched 101.91, the strongest since Feb. 14. The Japanese currency was at 80.26 yen per dollar, 0.1 percent higher than yesterday’s close.
The Australian dollar rose 0.4 percent to 99.53 U.S. cents. New Zealand’s currency advanced 0.4 percent to 76.73 U.S. cents.
FOMC Minutes
Several Fed policy makers said a loss of momentum in growth or increased risks to their economic outlook could warrant additional action to keep the recovery on track, according to minutes of the FOMC’s April 24-25 meeting released yesterday in Washington. Central bankers last month affirmed their plan to hold interest rates near zero at least through late 2014 as they sought to push down an unemployment rate that has stayed above 8 percent for more than three years.
The Dollar Index (DXY) may be set for a “corrective snap back” after posting its longest string of gains on record, MacNeil Curry, head of foreign exchange and interest rates technical strategy at Bank of America in New York, wrote in a report yesterday. ‘However, against 80.38 trendline support, the larger bull trend remains’’ and the gauge may see resistance in the 82.59 to 83.36 area, he wrote.
Resistance refers to a level where sell orders may be clustered, while support is a level where there may be an accumulation of orders to buy.
Longest Advance
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, slid 0.2 percent to 81.284, after completing a 13-day advance yesterday, the longest string of gains since its inception in 1973.
Demand for the yen was hampered amid speculation BOJ policy makers may ease monetary policy when they meet on May 23 after the central bank failed to buy as much government debt as it planned yesterday, the first time that’s happened since the the program was set up in October 2010 to provide liquidity to the market.
The operation saw offers to sell 480.5 billion yen ($6 billion) of debt maturing between one and two years, falling short of the BOJ’s planned 600 billion yen purchase, according to the central bank’s website.
Easing Speculation
“Growing speculation of the BOJ’s policy easing seems to be one of the reasons the yen is weakening,” Barclay Plc analysts Masafumi Yamamoto and Bill Diviney wrote in a note to clients today. Yesterday’s BOJ operations “heightened expectations that the central bank will have to extend its asset purchases to longer-maturity bonds.”
The extra yield investors demand to hold two-year Treasuries instead of Japan’s debt was at 18 basis points, near the most since April 9.
Standard Chartered Plc recommended buying the dollar against the yen, citing the widening U.S. spreads to Japanese rates, according to a note to clients today.
The 17-nation euro yesterday dropped to the lowest in four months against the dollar and the weakest in three months versus the yen amid mounting concern Greece will exit the 17-nation currency area. The indebted nation is preparing for its second election in less than two months.
Panagiotis Pikrammenos, head of Greece’s Council of State, the highest administrative court, was sworn in as head of the caretaker administration yesterday. The formal announcement of the election date, probably June 17, will be made after the new parliament is sworn in today and then dissolved.
“The Greece issue is still bubbling away and we’ve got to wait a month now before we get the elections,” said CBA’s Capurso. “I can see the euro falling, but much more gradually.”
The euro rebounded, paring a four-day decline against the dollar, as the currency’s 14-day relative strength index fell to 22 yesterday, below the 30 level that some traders see as signaling an asset may reverse direction.
To contact the reporter on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net Kristine Aquino in Singapore at kaquino1@bloomberg.net;
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
