BLBG:Dollar Set For Weekly Gain On Signs Global Growth Slowing
The dollar headed for a weekly advance against most of its major peers as shares fell and a report today showed German business confidence dropped to the lowest in more than two years, boosting demand for safer assets.
The yen weakened as Japanese lawmakers in the lower house prepared to vote on a bill to double sales tax. India’s rupee slid to a record low against the dollar on concern economic growth is slowing around the world. Demand for the 17-nation euro was limited after Moody’s Investors Service lowered credit ratings on 15 banks.
“Should global growth slow, that is likely to lead to buying of the dollar,” said Daisaku Ueno, a senior foreign- exchange and fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo, a unit of Japan’s biggest listed bank. “In an ugly contest, the euro is likely to get more votes than the dollar because of the difference in their economic situations and monetary policy.”
The dollar traded at $1.2539 per euro at 9:11 a.m. London time, from $1.2540 in New York yesterday, when it climbed 1.3 percent, the sharpest advance since Dec. 12. It has added 0.8 percent this week, the most since the five-day period ended May 25. The U.S. currency gained 0.1 percent to 80.37 yen, after appreciating to 80.52, the strongest level since May 16. The yen was little changed at 100.74 per euro.
The MSCI Asia Pacific Index (MXAP) of regional shares dropped 1.3 percent today following a 2.2 percent plunge in the Standard & Poor’s 500 Index (SPX) in New York yesterday. The Stoxx Europe 600 Index slid 0.8 percent.
Ifo Survey
The business climate index for Germany, based on the Ifo institute’s survey of 7,000 executives, dropped to 105.3 from 106.9 in May. Economists predicted a decline to 105.6, according to the median estimate in a Bloomberg News survey.
Data yesterday showed euro-area manufacturing shrank at the fastest pace in three years, and a Chinese output gauge indicated contraction. More Americans than forecast filed claims for jobless benefits, manufacturing in the Philadelphia region shrank and sales of existing homes fell, reports showed.
“It looks like the world’s economies are dragging each other down,” said Kazuo Shirai, a trader at Union Bank NA in Los Angeles. “The markets are getting risk-off with stock prices falling.”
Moody’s Cuts
The Dollar Index (DXY), which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, was little changed at 82.355, after touching 82.465, the strongest level since June 13.
Among bank downgrades from Moody’s yesterday, Credit Suisse Group AG’s credit rating was reduced by three levels and Morgan Stanley’s by two steps. The rating changes reflect the lenders’ “significant exposure to the volatility and risk of outsized losses inherent to capital-markets activities,” Moody’s Global Banking Managing Director Greg Bauer said in a statement.
German Chancellor Angela Merkel, French President Francois Hollande, Italian Prime Minister Mario Monti and Spanish Premier Mariano Rajoy are set to gather in Rome today. The International Monetary Fund said nations must make a “strong commitment” to the euro to stop a plunge in investor confidence.
“The news out of Europe remains pretty dour, despite the fact that we’ve had a bit of consolidation higher the last couple weeks,” Mike Moran, a currency strategist at Standard Chartered Bank, said in a telephone interview from New York. “That plays into a broadly risk-averse investor mindset, which has been helping the dollar.”
Dollar-Yen
The euro is down from this year’s high of $1.3487 on Feb. 24 and has depreciated about 6.7 percent in the past 12 months, according to Bloomberg Correlation-Weighted Indexes that measure 10 developed-market currencies.
The dollar climbed above 80 yen yesterday for the first time in a month. Prime Minister Yoshihiko Noda’s Democratic Party struggled to overcome internal resistance to his bill to double Japan’s consumption tax before a lower-house vote that may come as soon as today.
Former DPJ leader Ichiro Ozawa said he will vote against the bill to raise the 5 percent tax, risking possible expulsion from the party. As head of the its largest faction, Ozawa could take dozens of legislators with him. Noda has said the tax increase is necessary to control record debt and ballooning welfare costs.
“There may be some overseas investors reacting to political uncertainty over the tax debate and concern about a possible downgrade of Japan’s credit rating,” weakening the yen, Yunosuke Ikeda, head of Japan foreign-exchange research at Nomura Securities Co., the nation’s biggest brokerage, wrote in a note to clients today.
The Indian rupee fell as much as 1.8 percent to 57.3275 per dollar, the weakest since Bloomberg began tracking the data in 1973.
To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net; Keith Jenkins in London at kjenkins3@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
