BLBG:Dollar Falls on Obama Budget Optimism; Aussie Climbs
The Dollar Index fell from near a 10-week high as demand weakened for the relative safety of the U.S. currency amid prospects lawmakers will reach agreement on the nation’s budget and avert the so-called fiscal cliff.
The greenback weakened versus all but one of its 16 major counterparts after U.S. President Barack Obama expressed confidence that an agreement would be reached over the triggering of automatic spending cuts and tax increases at year- end that may push the economy into recession. The yen touched the lowest level in almost seven months versus the dollar. Australia’s currency rose as gains in Asian and European equities boosted demand for higher-yielding assets.
“Overall it’s a slightly softer tone for the dollar to start the week,” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. Optimism that the U.S. budget would be agreed “has provided slight relief for risk.”
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against currencies of six U.S. trading partners, fell 0.2 percent to 81.068 at 9:45 a.m. London time. It reached 81.455 on Nov. 16, the highest since Sept. 5.
The yen was little changed at 81.24 per dollar after touching 81.59, the weakest level since April 25. The Japanese currency lost 0.1 percent to 103.72 per euro after earlier depreciating to 104.11, the least since Oct. 25. The 17-nation euro climbed 0.2 percent to $1.2769.
President Confident
“I am confident we can get our fiscal situation dealt with,” Obama said at a news conference in Bangkok, where he began a three-nation trip that included the first visit by a sitting U.S. president to Myanmar. House Speaker John Boehner said Republicans are willing to put revenue on the table in exchange for spending cuts after Nov. 16 discussions with Obama, which he called “constructive.”
Japan’s currency dropped against all but two of its major peers after Liberal Democratic Party leader Shinzo Abe said he’ll choose someone who favors inflation targets as the next Bank of Japan governor, according to a report by Kyodo News. The BOJ will end a two-day policy meeting tomorrow.
“What’s going on in Japanese politics is probably a more important driver for the yen, at least in the near term, and that can see it weakening,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia. “In the medium term, you can get these knee-jerk reactions” to BOJ easing signals, he said.
LDP Favored
The yen last week suffered it biggest decline against the dollar since February as Prime Minister Yoshihiko Noda dissolved the lower house of the parliament, paving the way for elections that polls show his Democratic Party of Japan will lose. Abe indicated he would consider asking the BOJ to directly buy the nation’s construction bonds if he becomes the next prime minister, Kyodo News cited him as saying on Nov. 17.
The Nikkei newspaper reported today that 25 percent of respondents in an opinion poll favor Abe’s LDP in the Dec. 16 election, compared with 16 percent for the ruling DPJ. The Nikkei cited a nationwide survey taken Nov. 16-18.
In a Bloomberg News poll of economists, all 21 economists surveyed expect BOJ Governor Masaaki Shirakawa’s board to take no action at the policy meeting that ends tomorrow. At its last gathering on Oct. 30, the central bank increased asset purchases by 11 trillion yen, announced a new lending program and signed a joint statement with the government on ending deflation. Shirakawa is due to step down in April.
Japan’s currency has fallen 7 percent this year, the most among the 10 developed currencies measured by Bloomberg Correlation-Weighted Indexes. The euro is the second-worst performer, losing 2.7 percent, while the dollar has declined 1.1 percent.
Excessive Gain
The 14-day relative strength index for the dollar-yen rate rose to 70.4 on Nov. 16, above the 70 level that some traders see as a sign that an asset’s price has gained too fast and may reverse course.
“We’d be looking for any further gains in dollar-yen to fade,” said Mike Jones, a currency strategist at Bank of New Zealand in Wellington. “Given the size of last week’s moves, I think we’ll probably just see some consolidation heading into the BOJ meeting.”
Futures traders decreased their bets the yen will fall against the dollar, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on a decline in the yen compared with those on a gain -- so-called net shorts -- was 30,447 on Nov. 13, compared with 40,104 a î´week earlier.
Bets the euro will drop against the dollar were 83,646, up from net shorts of 67,141 a week earlier.
Brussels Meeting
In Europe, finance ministers are aiming to stitch together Greece’s next aid payment this week. In addition to a disagreement between the European Union and International Monetary Fund over extending the deadline for the nation to meet its debt target, the ministers will attempt to re-engineer the current bailout without asking taxpayers to put up more money.
“It’s quite likely that we get some positive noise out of the finance ministers’ meeting about Greece getting a sign-off on its next tranche,” said Bank of New Zealand’s Jones. “But the fundamental backdrop for the euro still isn’t favorable, given that incoming data has been quite weak.”
Data last week showed the euro-area’s economy was pushed into a technical recession, with its gross domestic product shrinking for a second-straight quarter in the period that ended in September.
Asian shares rose today, helping the Australian dollar climb against most of its major peers. The so-called Aussie added 0.4 percent to $1.0378. The Stoxx Europe 600 index of equities and the MSCI Asia Pacific Index (MXAP) rose 0.9 percent.
To contact the reporters on this story: Neal Armstrong in London at narmstrong8@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
