BLBG:Dollar Rises As Europe, China Concern Boost Haven Demand
The dollar rose versus most of its 16 major peers as investors sought the relative safety of the U.S. currency amid concern Chinese economic growth is slowing and Europe’s debt crisis is deepening.
The Dollar Index (DXY) climbed to a 21-month high after a report indicated Chinese manufacturing grew less than forecast last month. The U.S. currency’s appeal was also boosted after leaders of Italy and the European Central Bank clashed with Germany by demanding bolder steps to stabilize the economies of the 17- nation euro bloc. The yen weakened after Japan’s Finance Minister Jun Azumi pledged to take “decisive” action if excessive gains in the currency persist.
“The U.S. dollar is the gainer for now because of risk aversion,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “There will be more downside risk for today” for market sentiment, he said.
The dollar rose 0.2 percent to 78.47 yen as of 6:56 a.m. in London. The U.S. currency was little changed at $1.2363 per euro and touched $1.2324, the strongest since July 2010. The yen was at 97.03 per euro from 96.84 yesterday, when it touched 96.51, the strongest since Dec. 1, 2000.
China’s manufacturing Purchasing Managers’ Index fell to 50.4 last month from 53.3 in April, the statistics bureau and logistics federation said in a statement today in Beijing. It’s the weakest reading since December and compares with the 52.0 median forecast in a Bloomberg News survey of economists. A reading above 50 indicates expansion.
Germany Pushed
In Europe, Italian Prime Minister Mario Monti and ECB President Mario Draghi pushed Germany to give up its opposition to direct euro-area aid for struggling banks.
Monti told a Brussels conference yesterday that German Chancellor Angela Merkel’s vision of a stable economy “risks being undermined because of lack of promptness in setting up the necessary instruments to limit the contagion.”
Draghi told a European Parliament committee in Brussels yesterday that “it’s not our duty, it’s not in our mandate” to “fill the vacuum left by the lack of action by national governments on the fiscal front,” on “the structural front, and on the governance front.”
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, gained as much as 0.3 percent to 83.309, the highest level since August 2010.
Dollar ‘Supreme’
The gauge may be poised for further gains after it breached the 61.8 percent Fibonacci retracement level of its decline from a high of 88.708 on June 7, 2010 to a low of 72.696 on May 4, 2011, according to BNP Paribas SA. “The U.S. dollar remains supreme,” the bank said in a report today.
The index surpassed the retracement level of 82.591 on May 30, according to data compiled by Bloomberg.
The U.S. currency has advanced 3.3 percent this year, the best performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen has climbed 1.1 percent and the euro declined 2 percent.
The yen weakened as Azumi’s comments fueled speculation officials are preparing to intervene in currency markets.
“We will continue to carefully monitor currency market moves with more caution,” Azumi told reporters in Tokyo today. “If these excessive moves continue, I think I must take decisive action” on the yen, he said.
The last time Japan intervened in the currency market to stem the yen’s appreciation was on Nov. 4. Japanese officials sold at least 14.3 trillion yen ($182.4 billion) last year to stem currency strength that is forcing exporters to cut labor costs as they lose customers to their overseas rivals.
The Australian and New Zealand currencies were set to complete five-week declines against the dollar as Asian stocks fell. The MSCI Asia Pacific Index (MXAP) of shares lost 0.9 percent.
The Aussie dropped 0.4 percent to 96.99 U.S. cents, extending this week’s slide to 0.6 percent. The so-called kiwi fell 0.2 percent to 75.24 cents and has retreated 0.2 percent since May 25.
To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net
To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net
