SD: Dollar Falls to Seven-Month Low Versus Yen Before Fed Decision
Sept. 13 (Bloomberg) -- The dollar dropped to the weakest in seven months versus the yen amid speculation the Federal Reserve will announce it will buy bonds under a program of quantitative easing that tends to debase the currency.
The greenback slid toward a four-month low against the euro before the central bank also releases policy makers’ forecasts for unemployment, inflation and the expected path of the federal funds rate. Sweden’s krona fell against all but one of its 16 major peers as consumer-price inflation slowed more than economists forecast and unemployment increased. South Africa’s rand was the worst performer of the most active currencies for a second day as mining-industry labor unrest spread.
“We forecast QE and we have been for some time,” said Steven Saywell, head of currency strategy for Europe at BNP Paribas SA in London. “We are very bearish on the dollar and dollar-yen is no exception. During periods of QE the dollar tends to fall fairly constantly.”
The dollar fell 0.4 percent to 77.59 yen at 8:31 a.m. New York time, after reaching 77.56, the least since Feb. 14. It slid 0.1 percent to $1.2911 per euro after touching $1.2937 yesterday, the weakest since May 11. The euro slipped 0.2 percent to 100.22 yen.
The Dollar Index fell a third day before the Fed concludes its two-day policy meeting at which economists surveyed by Bloomberg forecast a third round of QE will be announced.
QE3 Anticipation
The central bank is also predicted to extend the duration of its zero-interest-rate policy into 2015. Two previous series of bond purchases totaling $2.3 trillion have failed to revive the labor market, which Fed Chairman Ben S. Bernanke said last month is a “grave concern.”
“Anticipation of QE3 is very high,” said Yuji Kameoka, chief currency strategist at Daiwa Securities Co. in Tokyo. “The dollar may extend declines for some time, given that QE3 isn’t priced-in completely.”
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, declined 0.1 percent to 79.632. It yesterday touched 79.522, the lowest since May 4.
Since December 2008, when the Fed began its asset-purchase programs, the index has dropped more than 8 percent.
The dollar has depreciated 1.7 percent in the past week, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen was little changed and the euro advanced 0.7 percent.
Yen Surge
Japan’s Vice Finance Minister Takehiko Nakao told reporters in Tokyo today the recent surge in the yen against the dollar has been “obviously speculative” and that Japan can’t overlook such moves.
Further appreciation in the yen may see Japan intervene in the currency market, according to Steven Barrow, head of Group of 10 research at Standard Bank Plc in London.
Japanese Finance Minister Jun Azumi ordered currency intervention on Oct. 31, after the yen strengthened to a post- war record 75.35 per dollar.
“If the Fed were to act particularly aggressively today and we were to see dollar-yen fall quite significantly, then I think we probably would see some intervention,” Barrow said on Bloomberg TV’s “The Pulse” with Guy Johnson. “We’re 77.5 now, so you could say that we’ve maybe still got a little bit of a way to go, but I don’t think we’re that far away,” he said.
Euro Challenges
The euro strengthened against most of its major peers today even as Greece’s Prime Minister Antonis Samaras received the second refusal in four days from coalition partners over plans to reduce spending that are key to receiving international aid. It rose yesterday after a German court said the country can ratify the European Stability Mechanism, a 500 billion-euro rescue fund.
Samaras faces renewed opposition from Democratic Left leader Fotis Kouvelis and Pasok leader Evangelos Venizelos after a meeting yesterday over plans to reduce wages and pensions that have already been criticized by inspectors from the euro area, the European Central Bank and the International Monetary Fund as not going far enough.
Swedish consumer prices rose an annual 0.7 percent, the same as in July, Statistics Sweden said today. Inflation was estimated at 0.9 percent in a Bloomberg survey of 11 economists. The krona dropped 0.4 percent to 6.5943 per dollar.
Rand Drops
South Africa’s rand weakened after Anglo American Platinum Ltd., the largest producer of the metal, said yesterday it suspended its Rustenburg operations after workers were intimidated. The threats follow stoppages at Lonmin Plc’s Marikana mine and Gold Fields Ltd.’s KDC West shaft.
About 43,000 people are either on strike at the three companies or staying away from work following conflict at Lonmin’s Marikana site last month in which 44 people died.
The rand fell 0.7 percent to 8.3964 per dollar.
Switzerland’s franc fell for a second day against the euro after the Swiss National Bank announced it would maintain its 1.20 limit against the shared currency.
The franc dropped 0.3 percent to 1.2128 per euro after declining to 1.2155 on Sept. 7, the weakest since Jan. 9.
