BLBG: Dollar Set for Weekly Drop on China Stability Signs
The dollar headed for a weekly decline against all its major counterparts as reports showing the economies of China, Europe and the U.K. are stabilizing damped demand for the relative safety of the U.S. currency.
Norway’s krone rose the most in five weeks versus the euro after inflation unexpectedly accelerated in July. Australia’s dollar strengthened for a fifth day versus the greenback as China’s industrial production expanded more in July than analysts predicted, boosting the outlook for the South Pacific nation’s exports. The euro was at almost a seven-week high versus the dollar before a report next week that economists said will show the region returned to growth last quarter.
“Better-than-expected data in the euro zone and the U.K. has been adding to the tailwinds for the euro and pound versus the dollar,” said Valentin Marinov, head of European, Group of 10 currency strategy at Citigroup Inc. in London. “We could be close to dollar weakness bottoming out with the key trigger being more positive U.S. data. The second half of the year is likely to be much better than the first half.”
The dollar fell 0.3 percent to 96.38 yen at 8:40 a.m. in New York, having dropped 2.6 percent this week, the most since the period ended June 14. The U.S. currency was little changed at $1.3377 per euro after depreciating to $1.34 yesterday, the weakest since June 19. The euro fell 0.4 percent to 128.88 yen.
The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 major peers, was little changed at 1,016.85 after dropping to 1,015.49 yesterday, also the lowest since June 19. The gauge has declined 1.2 percent this week.
China Production
China’s industrial production rose 9.7 percent from a year earlier, after expanding 8.9 percent in June, the National Bureau of Statistics said today in Beijing. Retail sales advanced 13.2 percent while fixed-asset investment excluding rural households grew 20.1 percent in the first seven months of the year.
Reports this week showed services in the euro area shrank less than initially estimated, German industrial production rebounded and U.K. services and manufacturing production both surpassed economists’ forecasts.
The dollar has slumped 3.7 percent in the past month, the worst performer apart from the Aussie of 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro rose 1.3 percent and the yen gained 1.5 percent.
Krone Gains
Norway’s krone rose to a seven-week high against the dollar after Statistics Norway said inflation, adjusted for taxes and energy prices, was at an annual 1.8 percent, compared with 1.4 percent in June. Underlying consumer prices increased 0.4 percent.
“The inflation data in Norway rules out any cut in rates for now,” Citigroup’s Marinov said. “The krone could recover more ground as we move closer to the Norges Bank meeting in September.”
The krone jumped 1.1 percent to 7.8158 per euro, the biggest gain since July 8. Norway’s currency strengthened 1 percent to 5.8476 per dollar after touching 5.84, the strongest level since June 20.
The euro-area’s gross domestic product expanded 0.2 percent in the second quarter, after contracting for the previous six quarters, according to the median estimate in a Bloomberg survey before the report is released on Aug. 14.
Aussie Strengthens
Australia’s dollar headed for its biggest weekly advance since December 2011 after amid signs of growth in China, its largest trading partner.
The currency rose against 14 of its 16 major counterparts today after the Reserve Bank of Australia damped expectations for further easing after cutting its key interest rate to a record low this week. The central bank reduced its outlook for growth in its Statement on Monetary Policy today.
China’s “industrial production number was the one that everyone was looking for,” said Chris Weston, chief market strategist at IG Markets Ltd. in Melbourne. “It’s been a good read on the real economy and it blew expectations out of the water. This is good news for Australia.”
Australia’s dollar climbed 0.7 percent to 91.64 U.S. cents after advancing to 91.73 cents, the highest level since July 30. The currency has appreciated 2.9 percent this week, the most since the period ended Dec. 2, 2011.
To contact the reporters on this story: Neal Armstrong in London at narmstrong8@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
