BLBG:Dollar Near 8-Week Low Versus Yen On Fed Bets; Kiwi Gains
The dollar traded 0.3 percent from an eight-week low against the yen before U.S. data that may add to signs of an economic slowdown, boosting speculation the Federal Reserve will expand stimulus and debase the currency.
U.S. reports today are forecast to show slowing durable- goods orders and pending home sales. The euro weakened before data that economists said will signal retail sales in Italy declined and Spain’s unemployment rate climbed, adding to evidence of how Europe’s debt crisis is weighing on the real economy. New Zealand’s dollar climbed after the country’s central bank kept interest rates unchanged and as an advance in Asian stocks bolstered demand for riskier currencies. The yen pared earlier gains.
“The end of August is the most likely date for a signal from the Fed for QE,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp. (WBC), referring to asset purchases by the Fed known as quantitative easing. “That would be a signal for markets to sell the U.S. dollar.”
The dollar was little changed at 78.17 yen as of 6:46 a.m. in London from 78.16 at the close in New York yesterday. It fell to 77.94 on July 23, the weakest since June 1. The 17-nation euro dropped 0.1 percent to $1.2144, paring yesterday’s 0.8 percent rally. It slid 0.1 percent to 94.93 yen.
The MSCI Asia Pacific Index of shares rose 0.7 percent.
U.S. orders for durable goods probably rose 0.3 percent in June after a 1.3 percent gain in May, according to economist estimates in a Bloomberg News survey taken before the Commerce Department releases the figures today. The National Association of Realtors may say today its index of pending home purchases gained 0.3 percent in June, following a 5.9 percent jump in May, a separate poll showed.
U.S. Economy
Another set of data is forecast to show U.S. gross domestic product expanded at an annualized 1.4 percent in the second quarter, the slowest pace in a year.
Fed Chairman Ben S. Bernanke said last week that policy makers are “looking for ways to address the weakness in the economy should more action be needed to promote a sustained recovery in the labor market.” The Fed will hold a two-day policy meeting starting July 31.
Bernanke is scheduled to deliver a speech to central bankers on Aug. 31 at an annual conference in Jackson Hole, Wyoming. During the 2010 event, he foreshadowed a second round of asset purchases.
Europe’s Economy
The euro rallied yesterday after Ewald Nowotny, a European Central Bank council member, said there were arguments in favor of granting a banking license to the European Stability Mechanism, a move that would give the region’s permanent bailout fund access to ECB lending.
Retail sales in Italy probably dropped 0.3 percent in May, after falling 1.6 percent in April, according to economists in a Bloomberg survey before today’s data. Another report tomorrow is forecast to show the Spanish jobless rate rose to 24.7 percent during the second quarter from 24.4 percent in the previous period.
“In addition to the deterioration in the European economy, there is a good chance that the ECB will have to ease policy further,” said Kikuko Takeda, a senior currency economist in London at the Bank of Tokyo-Mitsubishi UFJ Ltd. The easing outlook “gives a green light to euro selling.”
The central bank reduced its benchmark rate to a record low of 0.75 percent and took its deposit rate to zero on July 5. ECB President Mario Draghi said “economic growth in the euro area continues to remain weak with heightened uncertainty weighing on both confidence and sentiment.”
Worst Performance
The common currency has slumped as the region’s debt crisis has deepened, prompting 5 of 17 member states to request bailouts. The euro has dropped 4.9 percent in the past three months, according to Bloomberg Correlation-Weighted Indexes, the worst performance among the 10 currencies tracked. The yen has gained 8.7 percent and the dollar strengthened 4.5 percent over the same period.
The New Zealand dollar strengthened for a second day after the Reserve Bank left its official cash rate at 2.5 percent for an 11th-straight time at a meeting today. The economy should “grow modestly over the next few years,” central bank Governor Alan Bollard said in a statement. The rate decision was forecast by all 16 economists in a Bloomberg survey.
“The RBNZ did say they were quite confident about the outlook for New Zealand’s economy,” said Peter Dragicevich, a Sydney-based foreign-exchange economist at Commonwealth Bank of Australia. (CBA) “We still expect the next move by the RBNZ to be a hike. We’ve seen the New Zealand dollar supported by that.”
The so-called kiwi dollar climbed 0.5 percent to 79.28 U.S. cents. Australia’s dollar added 0.3 percent to $1.0334.
To contact the reporters on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net.
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.
