BLBG:Dollar Rises Before U.S. Housing Data, Fed Minutes
The dollar gained versus most major peers before data that may show an improving U.S. housing market, damping prospects the Federal Reserve will start a third round of asset purchases, or quantitative easing.
Demand for the greenback was supported before the U.S. central bank releases today minutes of its most recent meeting. The yen rose against the Australian and New Zealand dollars as Asian stocks declined. The euro traded 0.2 percent from a six- week high ahead of talks among European leaders this week, beginning with Luxembourg Prime Minister Jean-Claude Juncker’s visit to Greece today to discuss the nation’s request for a two- year extension to its fiscal adjustment program.
“Our central case is the Fed won’t do QE3,” said Richard Grace, Sydney-based chief currency strategist and head of international economics at Commonwealth Bank of Australia (CBA), the nation’s largest lender. “We don’t think the case is quite there for the Fed to move down that road. We’re expecting the U.S. dollar to bounce back a little bit over coming weeks.”
The dollar was at $1.2460 per euro at 7:01 a.m. in London after sliding to $1.2488 yesterday, the weakest since July 5. The greenback was little changed at 79.27 yen. The Japanese currency added 0.1 percent to 98.77 per euro.
Sales of existing homes in the U.S. probably climbed to a 4.51 million annual rate last month from a 4.37 million pace in June, according to the median estimate of economists in a Bloomberg News survey before today’s report from the National Association of Realtors.
Fed Outlook
The Fed will release records of its two-day meeting concluded on Aug. 1, when officials refrained from adding new stimulus measures that tend to debase the greenback.
The U.S. central bank bought $2.3 trillion of mortgage and Treasury debt between 2008 and 2011 in two rounds of quantitative easing to cap borrowing costs. Policy makers have held the Fed’s key rate in a range of zero to 0.25 percent since 2008 and plan to keep it there at least through late 2014.
The Dollar Index may find support at around 81.5 after recent declines, according to Derek Mumford, a director in Sydney at Rochford Capital, a currency risk-management company. “That will contain any sell off at the moment,” Mumford said. Support is an area on a chart where orders to buy may be clustered.
The gauge, which IntercontinentalExchange Inc. uses to track the currency against those of six U.S. trading partners, was little changed at 81.96 after sliding to 81.79 yesterday, the weakest since July 4. The Dollar Index last touched 81.5 on June 29, when it declined to as low as 81.43.
Best Performance
The greenback has advanced 7.1 percent in the past 12 months, the best performance alongside the Australian dollar among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro posted the second-biggest decline, dropping 8.1 percent. The yen gained 1.7 percent.
A senior lawmaker with German Chancellor Angela Merkel’s party, Norbert Barthle, said concessions are possible for Greece so long as Prime Minister Antonis Samaras shows a willingness to meet the main targets set out in his country’s bailout program.
The Greek leader travels to Berlin and Paris on Aug. 24 and 25 after French President Francois Hollande and Merkel meet in the German capital on Aug. 23.
Shorts ‘Squeezed’
“There are some quite short positions in the euro which will be squeezed out of the market” before the meetings in Europe, Rochford Capital’s Mumford said. “We get this relief rally and then pressure will build again for another look lower.” A short position is a bet an asset will decline.
The yen was supported even after figures today showed the nation’s exports declined 8.1 percent in July, exceeding the 2.9 percent drop predicted in a Bloomberg survey. The country had a trade deficit of 517.4 billion yen ($6.5 billion) after a revised surplus of 60.3 billion yen in June.
The Australian and New Zealand currencies dropped as Asian stocks declined and before reports that may show global manufacturing is struggling to recover.
“We think the markets are prone to a bit of disappointment,” said Gavin Stacey, chief rate strategist in Sydney at Barclays Plc. “To date, we’ve not seen too much in the way of policy stimulus actually turning around some of these leading indicators.”
Readings for purchasing managers’ indexes due tomorrow may show continued contraction in German and French manufacturing, with the measure for the euro-area as a whole forecast to indicate a shrinkage for a 13th-straight month, according to surveys conducted by Bloomberg News. A report on Chinese manufacturing from HSBC Holdings Plc is also due.
The so-called Aussie dollar fell 0.5 percent to $1.0437 and 82.74 yen. Its New Zealand counterpart, nicknamed the kiwi, slid 0.4 percent to 80.81 U.S. cents and 64.06 yen. The MSCI Asia Pacific Index (MXAP) of shares lost 0.5 percent.
To contact the reporter on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
