SF: Dollar Gains Versus Euro, Yen as Stocks, Housing Starts Decline
July 20 (Bloomberg) -- The dollar rose from a two-month low versus the euro and for a second day against the yen as declines in equities and U.S. housing starts last month renewed concern that the global economic recovery is faltering.
The euro weakened against all its most traded counterparts and the forint declined as Hungary's borrowing costs rose to a 19-week high at its first debt auction since international creditors suspended talks with the government. The yen dropped versus 13 of its 16 major counterparts as technical indicators signaled the recent rally was overdone and speculation lingered that the Bank of Japan will intervene to weaken the currency after it climbed to a seven-month high last week.
"The dollar is being bid on risk," said Andrew Wilkinson, senior market analyst at Interactive Brokers Group LLC in Greenwich, Connecticut. "People seem to be focused more on the equity futures and leaning towards the dollar."
The yen declined to 86.87 per dollar at 8:33 a.m. in New York, from 86.69 yesterday, after climbing to 86.27 on July 16, the strongest since Dec. 1. The euro dropped 0.7 percent to $1.2858.
Housing starts fell in June to the lowest level since October as a slump in sales following the expiration of a government tax incentive caused U.S. builders to cut back. Work began on 549,000 houses last month, fewer than forecast by the median estimate of economists surveyed by Bloomberg News and down 5 percent from May, Commerce Department figures showed.
The dollar's 14-day relative strength index against the yen, a gauge that compares the magnitude of gains and losses, was at 29 yesterday, below the 30 threshold that some traders see as a sign a price has fallen too far and is poised to rally.
The Bank of Japan may ease monetary policy if the yen stays around 85 against the dollar, Dow Jones Newswires reported yesterday. Central bank Governor Masaaki Shirakawa said last week a stronger yen and stock declines may hurt the economy.
--With assistance from Candice Zachariahs in Sydney and Yoshiaki Nohara in Tokyo. Editors: Dave Liedtka
