The yen rose to a post-World War II high against the dollar and rallied versus most of its other major counterparts as European sovereign debt concern before tomorrow’s summits spurred demand for a refuge.
The Canadian dollar slid for the first time in four days versus the greenback after the Bank Canada cut its outlook for growth while holding its target lending rate at 1 percent. New Zealand’s dollar was the biggest loser among major currencies as inflation slowed. The dollar rose against the South African rand and Mexican peso as a drop in U.S. confidence buoyed Treasuries.
“You’re seeing a general flight-to-quality, risk-off type of sentiment, and the yen is a frequent recipient of those moves,” said Carl Forcheski, a director on the corporate currency sales desk at Societe Generale SA in New York. “The market is watching the events in Europe.”
The yen appreciated 0.3 percent to 75.84 versus the dollar at 11:14 a.m. New York time after rallying to a record high 75.74. Japan’s currency advanced 0.7 percent to 105.31 against the euro. The euro decreased 0.3 percent to $1.3885 after earlier rising to $1.3960, the highest level since Sept. 8.
Canada’s dollar fell 1.2 percent to C$1.0154 versus the U.S. currency after the Bank of Canada said the nation’s economy will grow more slowly than projected and removed a reference to withdrawing stimulus. The target lending rate was held at 1 percent, where it has been since September 2010.
Weaker Kiwi
New Zealand’s dollar declined 1.2 percent to 79.74 U.S. cents as the South Pacific nation’s consumer prices increased 0.4 percent in the third quarter after rising 1 percent in the prior three months. The data fueled speculation the Reserve Bank of New Zealand will signal a willingness to keep its benchmark interest rate at a record low.
“This is a buy opportunity for kiwi,” said Greg Anderson, a senior currency strategist at Citigroup Inc. in New York. “The market is correctly reading it that RBNZ is not going to hike for several meetings, but it’s still an attractive currency for other reasons, and we’d expect continued strong domestic-led growth in New Zealand.”
European leaders increased pressure on Italian Prime Minister Silvio Berlusconi to specify how he will reach budget reduction targets as German lawmakers prepared to vote on a revamped euro-area bailout package.
The elements of the rescue may include expanding the reach of the 440 billion-euro ($611 billion) European Financial Stability Facility by turning it into a bond insurer and setting up vehicles to raise outside funds, possibly alongside the International Monetary Fund.
European Summits
A meeting of European finance ministers was canceled tomorrow. Summits of the 27 European Union leaders and 17 leaders of the euro area will take place tomorrow in Brussels as scheduled, EU President Herman Van Rompuy’s office said.
“There’s a risk that the markets will be disappointed with what they hear coming out of the euro summit tomorrow,” said Paresh Upadhyaya, head of Americas G-10 currency strategy at Bank of America Corp. in New York. “There seems to be a divide between Germany and the rest of Europe on some of these very important issues, on leveraging the EFSF, for example.”
The euro has declined 2.5 percent in the past six months, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The dollar has gained 3 percent over the same period, and the yen has risen 12 percent.
IntercontinentalExchange Inc.’s Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, rose 0.1 percent to 76.241 today on refuge demand.
U.S. consumer confidence unexpectedly slumped in October to the lowest level since March 2009, when the economy was in a recession, a report from the Conference Board showed. This month’s reading was less than the most pessimistic forecast in a Bloomberg News survey.
Treasury 30-year bond yields fell from the highest level in more than a month, dropping to 3.21 percent. The Standard & Poor’s 500 Index tumbled 1.3 percent, snapping a three-day winning streak.
To contact the reporters on this story: Allison Bennett in New York at abennett23@bloomberg.net; Catarina Saraiva in New York at asaraiva5@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
