BLBG: Dollar Falls to Two-Week Low Versus Yen as Trade Deficit Widens
By Ben Levisohn
April 13 (Bloomberg) -- The dollar dropped to a two-week low against the yen as a report showed the U.S. trade deficit increased in February more than economists expected, making the greenback less attractive to investors.
The euro traded at almost the highest level against the dollar in three weeks as Greece’s auction of Treasury bills drew stronger demand than at a previous sale. Sterling rose to almost the highest level against the dollar since February as the U.K.’s exports increased the most in seven years.
“The deterioration in U.S. trade is the direct reason we saw the dollar sell off,” said Kathy Lien, director of currency research at online foreign-exchange trader GFT Forex in New York.
The dollar dropped 0.3 percent to 92.93 yen at 10:12 a.m. in New York, from 93.24 yesterday. The euro traded at $1.3581, compared with $1.3592 yesterday, when it reached $1.3692, the highest level since March 18. The yen appreciated 0.4 percent to 126.21 per euro, from 126.74.
The U.S. trade deficit widened to $39.7 billion in February from a revised $37 billion in the previous month as import demand grew. The median forecast of 73 economists in a Bloomberg News survey was for an increase in the deficit to $38.5 billion from a previously reported $37.3 billion.
Sterling rose toward its highest level since February as the Office for National Statistics reported that exports surged 9.5 percent, helping to cut the trade deficit to 6.2 billion pounds ($9.5 billion), the least since June 2006.
Stronger Pound
The pound gained 0.2 percent to $1.5401 after reaching $1.5486 yesterday, the highest level since Feb. 23. It appreciated 0.3 percent against the euro to 88.16 pence.
The yen earlier traded higher after Bank of Japan Governor Masaaki Shirakawa said the central bank is seeing brighter signs for prices, an indication policy makers may raise their inflation forecasts this month.
“We’re starting to see more positive signs than negative signs,” the governor said at a parliamentary committee today in Tokyo. Improvements in consumer prices typically lag behind the narrowing of the demand gap by a year, he said.
Lingering deflation prompted Shirakawa and his board to double a bank lending program to 20 trillion yen ($214 billion) in March.
South Korea’s won retreated from an 18-month high on speculation the central bank sold the currency to counter gains that erode exporters’ income.
China’s Currency
The won also weakened after China’s President Hu Jintao told President Barack Obama yesterday in Washington that China won’t yield to “external pressure” in deciding when to strengthen the yuan. South Korea’s won rose five times as fast as China’s currency in the 12 months after authorities in Beijing last relaxed the foreign-exchange regime in July 2005, data compiled by Bloomberg show.
The won slid 0.9 percent to 1,123.90 per dollar after reaching 1,111.38 yesterday, the strongest level since September 2008, according to data compiled by Bloomberg.
Twelve-month non-deliverable yuan forwards declined 0.1 percent to 6.6315 per dollar, from 6.6237. The contracts reflect bets the currency will strengthen 2.8 percent from the spot rate of 6.8256.
China may allow the yuan to appreciate by June 30 to curb inflation while avoiding a one-time jump in value that might endanger export jobs, a survey of analysts showed.
Outlook for Yuan
Twelve of 19 respondents surveyed by Bloomberg News said the central bank will allow the currency to float more freely this quarter, five expect it to happen by Sept. 30, and the rest see the move by year-end. Eleven rule out a one-off revaluation, including state-owned Bank of China Ltd. and China Construction Bank Corp. Fifteen predict a wider daily trading range.
Greece sold 780 million euros ($1.06 billion) of 26-week bills at a yield of 4.55 percent, attracting bids for 7.67 times the securities offered, the nation’s Public Debt Management Agency said today in Athens. Greece also offered 780 million euros of 52-week securities at a yield of 4.85 percent, with a bid-to-cover ratio of 6.54 times.
Deteriorating sentiment toward Greek debt led to the lowest demand in a year at 26- and 52-week bill sales in January, when the debt agency raised 3.7 billion euros from the auctions, which included a 13-week security.
Euro-region finance ministers said on April 11 they would offer Greece as much as 30 billion euros in three-year loans in 2010 at about 5 percent interest. Another 15 billion euros would be provided by the International Monetary Fund.
Mounting concern that Greece will be unable to finance a budget deficit that is more than four times the European Union’s limit of 3 percent of gross domestic product drove the euro almost 5 percent lower this year through April 9, according to Bloomberg Correlation-Weighted Currency Indexes.
To contact the reporter on this story: Ben Levisohn in New York at blevisohn@bloomberg.net
