BLBG:Dollar Declines as Equities Rally Saps Demand for Safety; Won Advances
The dollar was set to fall against most of its 16 major peers this week as Asian shares extended a global rally, damping demand for lower-yielding assets.
Australia’s currency reached a two-week high versus the yen before U.S. data forecast to show spending and new-home sales increased in the world’s largest economy, boosting the allure of currencies linked to global growth. South Korea’s won strengthened after the central bank and Finance Ministry said they will try to reduce the currency’s volatility.
“I’m bearish on the U.S. dollar against the Australian dollar, kiwi dollar, Singapore dollar, pretty much everything else,” said Thomas Averill, managing director at Rochford Capital, a currency and interest-rate risk management company in Sydney. “You may see a bit of optimism in the early part of January.”
The dollar fell 0.2 percent to $1.3068 per euro as of 12:56 p.m. in Singapore from the close in New York yesterday. It has lost 0.2 percent since Dec. 16 and is poised for its first weekly decline since Dec. 2. The greenback dipped 0.1 percent to 78.10 yen. The euro was little changed at 102.06 yen.
The Australian dollar advanced to 79.51 yen, the highest since Dec. 8, before trading at 79.42, 0.3 percent above yesterday’s close in New York.
The MSCI Asia Pacific Excluding Japan Index (MXAPJ) of shares climbed 1.4 percent, after the Standard & Poor’s 500 Index rose 0.8 percent in New York yesterday. Japanese markets are closed today for a holiday.
Consumer Spending
Consumer spending in the U.S. grew for a fifth month in November, increasing 0.3 percent, according to the median estimate of economists in a Bloomberg News survey before Commerce Department figures today. Sales of new homes rose 2.6 percent last month, another survey showed before today’s report.
House Speaker John Boehner yesterday agreed to extend a U.S. payroll-tax cut past its Dec. 31 expiration. Without Congressional action, the payroll tax for employees will rise to 6.2 percent from the current 4.2 percent in January.
The won advanced against 15 of its 16 major counterparts as the Bank of Korea and Finance Ministry said today they will expand trade financing for exporters so that they can cope with the global economic slowdown.
Moody’s Investors Service said yesterday the outlook for the nation’s ratings remains stable even after the death of North Korean leader Kim Jong Il. Standard & Poor’s also affirmed the country’s stable status today.
The won appreciated 0.6 percent to 1,148.95 per dollar.
European Crisis
The yen has gained 3.9 percent versus the dollar this year, set to be the best performing currency among its major peers. The euro has lost 2.4 percent amid concern Europe’s prolonged debt crisis will hurt the region’s economy.
European Central Bank Executive Board member Lorenzo Bini Smaghi said policy makers shouldn’t shirk from using quantitative easing if deflation becomes a danger to the economy.
“I do not understand the quasi-religious discussions about quantitative easing,” Bini Smaghi, who will leave his post at the end of the month, said in an interview published yesterday by the Financial Times. The ECB confirmed the comments. “It is appropriate if economic conditions justify it, in particular in countries facing a liquidity trap that may lead to deflation.”
Italy is scheduled to auction 9 billion euros ($11.8 billion) of bills and as much as 2.5 billion euros of bonds on Dec. 28, followed by sales of debt maturing in 2014, 2018, 2021 and 2022 the next day.
S&P said this month it may cut the credit grades of 15 euro nations, including Italy, France and Germany.
“We’re bearish on the euro,” said Emma Lawson, a currency strategist at National Australia Bank Ltd. in Sydney. Policy makers in the European currency bloc “have addressed some of the liquidity issues that needed to be done, but sovereign issues are going to take a very long time now to resolve.”
To contact the reporters on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net.
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.
