BLBG:Euro Rises With Franc as Stocks Decline on Fed Outlook
The euro and franc strengthened as a slide in stocks around the world fueled demand for the relative safety of the currencies versus emerging-market counterparts.
The yen strengthened for the first time in three days against the dollar. India’s rupee fell to a record and Indonesia’s rupiah slumped to the lowest level since April 2009 on concern funds will flow out of Asian markets as the Federal Reserve reduces its bond-purchase program. New Zealand’s dollar weakened after central bank governor Graeme Wheeler said the currency was overvalued. Norway’s krone slid as the economy expanded less in the second quarter than analysts predicted.
“Investor expectations of tapering from the Fed are leading to a rise in global yields and that’s making external financing challenging” for emerging markets, said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “What we are seeing is funds coming back from emerging markets to developed markets.”
The euro gained 0.3 percent to $1.3378 as of 7:06 a.m. New York time. The common currency was little changed at 130.13 yen. Japan’s currency appreciated 0.3 percent to 97.27 per dollar after advancing to 95.81 on Aug. 8, the strongest since June 19. Switzerland’s franc climbed 0.3 percent to 92.10 centimes against the dollar. It was little changed at 1.2321 per euro.
The MSCI Asia Pacific Index of shares fell 1.7 percent while the Stoxx Europe 600 Index slid 1 percent.
Fed Minutes
The Fed will publish minutes of its July meeting tomorrow that may offer clues as to whether policy makers will start reduce their $85 billion of monthly bond purchases as soon as their gathering in September. The Federal Open Market Committee holds its next meeting on Sept. 17-18.
“The moves that we are seeing are pretty much broader moves with investors reducing their general participation in foreign-exchange markets,” said Michael Sneyd, a currency strategist at BNP Paribas SA in London. “It’s probably a step too far to say what we are seeing is a reallocation of funds. It’s much more fast money readjusting their positions ahead of the FOMC minutes and the next meeting in September,” he said, referring to speculative investors, such as hedge funds.
Japan’s currency rose 2.8 percent in the past month, the best performer of 10 developed-nation currencies tracked by Bloomberg Correlation Weighted Indexes. The euro gained 1 percent, while the dollar dropped 1 percent.
Rupiah Slides
India’s rupee dropped 0.4 percent to 63.37 per dollar after slumping to a record 64.12.
Indonesia’s currency fell 1.8 percent to 10,685 per dollar after sliding to 10,728, the weakest since April 2009. The rupiah is the only currency within an expanded basket of major currencies to have declined against the dollar every August for nine years. It’s down 4.5 percent since July 31.
The Australian and New Zealand currencies slid after comments from the nations’ central banks.
Minutes released today of the Reserve Bank of Australia’s Aug. 6 meeting signaled further interest-rate cuts remain a possibility.
Reserve Bank of New Zealand Governor Wheeler announced lending restrictions to curtail house prices and said the currency is “over-valued relative to what would be sustainable long-term.”
The kiwi tumbled 1.1 percent to 79.83 U.S. cents, while the Aussie lost 0.5 percent to 90.67 cents.
Norwegian gross domestic product, excluding oil, gas and shipping, increased 0.2 percent, after expanding a revised 0.6 percent in the first quarter, Oslo-based Statistics Norway said. Growth was seen at 0.7 percent, according to median estimate in a survey of 13 economists by Bloomberg.
“After this number, a rate cut is not out of the question anymore, as some have argued,” said Kjersti Haugland, an analyst at DNB ASA in Oslo.
Norway’s krone tumbled as much as 1.5 percent to 8.0111 per euro, the weakest level since July 8, and depreciated 0.9 percent to 5.9733 against the dollar.
To contact the reporter on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
