BS: Dollar Drops Versus High-Yield Peers on China Data; Aussie Rises
The dollar weakened against its higher-yielding counterparts after a report showed China’s services industry expanded last month, adding to signs the global economy is recovering.
The Bloomberg U.S. Dollar Index ended a five-day run of gains that took it to the highest level since July. The Australian dollar climbed for a third day after the nation’s economic growth quickened, while the New Zealand dollar also advanced. The pound rose for a sixth day versus the euro, climbing to the strongest level in more than three months, after a gauge of U.K. services reached the highest level since December 2006.
“The data coming out of China has been supportive of growth and sentiment,” Eric Viloria, senior currency strategist for Gain Capital Group LLC in New York, said in a telephone interview. “That’s something that’s going to be a positive for the Australian dollar and other high-yielders.”
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The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 other major currencies, fell 0.2 percent to 1,034.53 at 8:43 a.m. New York time, after reaching 1,038.61 yesterday, the most since July 16. The index had risen 1.1 percent in the past five days.
The U.S. currency was little changed versus the euro at $1.3170 per euro after climbing yesterday to the highest level since July 22. The greenback decreased 0.2 percent to 99.34 yen. Japan’s currency gained 0.2 percent to 130.83 per euro.
Aussie Strength
The Aussie gained versus all 31 of its most-traded counterparts on the Chinese services data and as a report showed the country’s gross domestic product unexpectedly accelerated last quarter. The currency appreciated 1 percent to 91.57 U.S. cents after rising to the strongest level since Aug. 19.
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New Zealand’s dollar rose versus the majority of its major peers as services in China, its biggest trade partner, rose in August. The so-called kiwi climbed 1.1 percent to 78.89 U.S. cents after touching the highest since Aug. 21.
“There is more confidence that the global economy is appearing to be robust,” said Michael Sneyd, a currency strategist at BNP Paribas SA in London. “We generally are seeing investors putting on risk-on positions, particularly in the Aussie and the kiwi, following slightly stronger data in Australia and China.”
The pound strengthened to a three-month high against the euro as a report showed U.K. services expanded at the fastest pace since 2006, boosted demand for the currency. Sterling increased 0.3 percent to 84.38 pence per euro after reaching the strongest since May 16. The British currency rose 0.3 percent to $1.5607.
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Central Banks
The Bank of England and the European Central Bank will announce interest-rate decisions tomorrow. U.K. central bank Governor Mark Carney introduced forward guidance on the path of interest rates last month, saying the Monetary Policy Committee won’t consider raising its key rate until unemployment falls to 7 percent, while MPC member Martin Weale voted against it.
“There is some speculation that the strength of the recent data will see another member join Weale’s dissent,” currency strategists at Brown Brothers Harriman & Co. led by Marc Chandler in New York wrote in a research note.
The euro weakened against most of its major peers after a gauge of services output in the euro area, based on a survey of purchasing managers, expanded less than initially estimated in August. Separate data showed the region’s economy grew 0.3 percent in the three months through June, in line with a forecast last month.
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Chinese Data
HSBC Holdings Plc’s and Markit Economics’s services gauge for China rose to 52.8 last month from July’s 51.3. An official report released Sept. 1 showed a manufacturing gauge climbed to a 16-month high in August, while data yesterday revealed the government’s services index at 53.9 in August, above the 50 level that indicates expansion.
In the U.S., Federal Reserve policy makers are debating whether the economy is strong enough to allow them to pare monthly purchases of $85 billion in Treasuries and mortgage debt, which tend to debase the dollar. Officials will reduce the amount at their Sept. 17-18 meeting, according to 65 percent of economists in an Aug. 9-13 Bloomberg survey.
The Fed releases its outlook survey known as the Beige Book today. Labor Department figures due Sept. 6 will show payrolls rose by 180,000 in August while the jobless rate held at 7.4 percent, according to a Bloomberg survey.
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Dollar Supportive
“It’s still a broadly constructive dollar environment,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “The payrolls report is first among equals as far as data is concerned, which is not surprising given the preoccupations with tapering.”
Trading in over-the-counter foreign-exchange options totaled $9.8 billion, compared with $27 billion yesterday, according to data reported by U.S. banks to the Depository Trust Clearing Corp. and tracked by Bloomberg. Volume in options on the dollar-Malyasian ringgit exchange rate totaled $1.5 billion, the largest share of trades at 15 percent. Options on the Aussie-U.S. dollar pair amounted to $1.4 billion, or about 15 percent.
Dollar-ringgit options trading was 150 percent more than the average for the past five Wednesdays at a similar time in the day. Aussie-U.S. dollar options trading was 100 percent more than average.
To contact the reporters on this story: Joseph Ciolli in New York at jciolli@bloomberg.net; David Goodman in London at dgoodman28@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
