BLBG:Dollar Falls Second Day Against Yen on Fed Outlook; Kiwi Slides
The dollar weakened for a second day against the yen as investors weighed when the Federal Reserve will slow the pace of bond purchases that have contributed to weakening the greenback.
The U.S. currency dropped versus most of its 16 major counterparts after a government report last week showed American employers hired fewer workers in July than economists forecast. The yen strengthened as Japanese stocks slid, spurring demand for the safety of the nation’s currency. The pound rose as U.K. services growth accelerated. New Zealand’s dollar slumped after China halted imports of milk powder from Auckland-based Fonterra Cooperative Group Ltd.
“The disappointment from the payroll data last week makes people question when the Federal Reserve will be able to start tapering its bond purchases,” said Jane Foley, a senior foreign-exchange strategist at Rabobank International in London. “The market is generally long dollars and that means the currency is going to open up to more disappointment. The dollar will be hard pressed to be much higher unless the upcoming data is particularly strong.” A long is a bet an asset will rise.
The dollar dropped 0.4 percent to 98.52 yen at 7:15 a.m. New York time after sliding 0.6 percent on Aug. 2. The U.S. currency was little changed at $1.3264 per euro. The yen strengthened 0.5 percent to 130.65 per euro after depreciating to 132.74 on July 24, the weakest level since May 23.
The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 major counterparts, fell 0.1 percent to 1,027.82 after sliding 0.6 percent on Aug. 2.
Payrolls Disappoint
U.S. payrolls rose by 162,000 in July, the smallest gain in four months, the Labor Department said Aug. 2. Economists surveyed by Bloomberg projected 185,000.
The Institute for Supply Management will say today its U.S. non-manufacturing index rose to 53.1 in July from 52.2 in June, the lowest since February 2010, according to a Bloomberg survey.
Fed Chairman Ben S. Bernanke said on June 19 the central bank may start dialing back its bond-buying program this year if the economy achieves sustainable growth. It has been buying $40 billion of mortgage-backed bonds and $45 billion of Treasuries each month to inject cash into the economy.
The dollar has strengthened 5.6 percent in the past six months, the best performer among the 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro gained 2.9 percent, while the yen weakened 0.2 percent.
Half of the 54 economists in a July 18-22 Bloomberg survey expected the Fed to decide to reduce the bond purchases at its next meeting on Sept. 17-18.
Fed ‘Tapering’
“I generally like the U.S. dollar,” Greg Gibbs, a senior currency strategist at Royal Bank of Scotland Group Plc in Singapore, said in a separate interview with Bloomberg Television. The economic data still point “toward the Fed beginning their tapering in September, so I think that’s going to keep the dollar pretty well supported.”
The yen rose against all except one of its 16 major peers as the Nikkei 225 Stock Average (NKY) slid 1.4 percent as it reacted to last week’s U.S. payroll data.
The yen tends to strengthen during periods of financial turmoil because Japan’s current-account surplus makes the country less reliant on foreign capital.
Futures traders reduced bets the would weaken against the dollar, figures from the Commodities Futures Trading Commission published on Aug. 2 showed.
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 82,135 on July 30, compared with net shorts of 87,496 a week earlier.
Pound Advances
The pound strengthened for a second day against the dollar as the U.K. services data added to signs Britain’s economy is gathering momentum.
“It’s surprising the foreign-exchange market for sure, to see how upbeat some of the data is,” said Neil Jones, head of European hedge-fund sales at Mizuho Bank Ltd. in London. “The U.K. is doing better than people expected and consequently the market is running short of the pound.’
The pound advanced 0.4 percent to $1.5349 after jumping 1.2 percent on Aug. 2, the biggest gain since June 6. Sterling appreciated 0.4 percent to 86.45 pence per euro.
The kiwi fell for a sixth day against the U.S. currency after Fonterra, the world’s largest dairy exporter, said on Aug. 3 that three batches of a whey protein made at a New Zealand plant last year may contain bacteria that can cause botulism.
Dairy products make up about a quarter of the South Pacific nation’s total overseas sales.
“Dairy exports are a big deal, and exports to China are a big deal for dairy exports,” said Imre Speizer, a markets strategist at Westpac Banking Corp. (WBC) in Auckland. “If China puts a ban on officially and it lasts for some significant period of time, you’ll probably see further negative reaction in the kiwi.”
New Zealand’s dollar tumbled 0.9 percent to 77.66 U.S. cents after falling to 76.84 cents on June 24, the weakest level since June 2012.
To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net;
To contact the editor responsible for this story: Nicholas Reynolds at nreynolds2@bloomberg.net
