BLBG:Dollar Trades Near One-Week Low Versus Euro Amid Global Growth Optimism
The dollar traded 0.3 percent from its lowest level in a week versus the euro before reports forecast to show orders at U.S. factories grew and the nation’s services industry expanded, damping demand for safer assets.
The greenback yesterday slid versus all of its most-traded peers as reports this week showed manufacturing in the U.S. and China improved in December, suggesting production is weathering strains from Europe’s debt crisis. Indonesia’s rupiah declined for a third day on speculation the central bank will reduce borrowing costs to support the economy as inflation slows.
“We are in a situation where stronger U.S. data does lead to risk appetite elsewhere and definitely to a weaker U.S. dollar,” said Adam Carr, a senior economist in Sydney at ICAP Australia Ltd., a unit of the world’s biggest interdealer broker. “The global economy is a lot better than people were expecting.”
The dollar traded at $1.3033 per euro at 2:25 p.m. in Tokyo after dropping 0.9 percent to $1.3050 yesterday, when it fell as low as $1.3077, the weakest since Dec. 28. The U.S. currency fetched 76.69 yen from 76.74. The euro was at 99.95 yen from 100.14 in New York.
Data from the U.S. Commerce Department due today may indicate bookings for factory goods (TMNOCHNG) climbed 2 percent in November after a 0.4 percent drop the previous month, according to a Bloomberg News survey of economists.
U.S. Economy
A report tomorrow from the Institute for Supply Management will probably show service industries (NAPMNMI) expanded in December at the fastest pace in three months, another Bloomberg survey projects. The ISM’s non-manufacturing index climbed to 53 from 52 in November, according to the median estimate of economists. A separate factory index (NAPMPMI) indicated the fastest growth in six months, the Tempe, Arizona-based group’s data showed yesterday.
Federal Reserve officials said they will start announcing their own predictions for the central bank’s key interest rate, according to minutes from last month’s Federal Open Market Committee meeting released yesterday.
By releasing their forecasts, central bankers are likely to alter expectations for the timing of the first increase in their benchmark rate, which has been kept near zero since December 2008. Last month, Fed officials repeated their view that economic conditions would warrant “exceptionally low levels for the federal funds rate at least through mid-2013.”
Dollar Falls
The dollar has fallen 1.4 percent in the past week, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The greenback gained 1.1 percent last year, snapping two years of declines.
The euro weakened versus the yen (JYEU) for the eighth time in nine days amid concern the region’s sovereign-debt crisis will dent growth.
European services and manufacturing output (ECPMICOU) probably contracted for a fourth month in December, according to the median estimate of economists polled by Bloomberg News before figures from London-based Markit Economics today. The data is expected to confirm that a euro-area composite index based on a survey of purchasing managers rose to 47.9 in December from 47 in November, below the 50 level that delineates contraction and expansion.
European inflation (ECCPEST) declined from a three-year high in December, a report today is predicted to show according to a separate Bloomberg poll. The inflation rate in the 17-nation euro area fell to 2.8 percent in December from 3 percent in the previous month, the European Union’s statistics office in Luxembourg is forecast to say.
Orderly Depreciation
“The underlying problems are going to remain and will likely generate an orderly depreciation of euro,” said Richard Grace, the Sydney-based chief currency strategist and head of international economics at Commonwealth Bank of Australia.
Grace predicts the currency will fall to $1.27 by June. The median forecast of 42 analysts polled by Bloomberg is for the euro to decline to $1.28 by the second quarter.
The European Financial Stability Facility plans to raise 3 billion euros ($3.9 billion) from a sale of three-year bonds to help finance the bailouts of Ireland and Portugal, it said in an e-mailed statement yesterday. The fund is targeting Jan. 5 for the sale, a person with knowledge of the matter said.
The plan comes after Standard & Poor’s said Dec. 6 the European Union’s bailout fund may lose its AAA rating.
“It appears that the market is quite short euro at the moment, so a successful bond auction could have the euro spike higher, but there would be a lot of sellers into the rally,” Commonwealth Bank’s Grace said.
The rupiah dropped against the dollar on speculation a slowdown in Indonesia’s inflation may prompt the central bank to lower its key interest rate at this month’s meeting.
Consumer prices rose 3.79 percent in December from a year earlier after increasing 4.15 percent the previous month, the Central Bureau of Statistics said Jan. 2. Bank Indonesia Governor Darmin Nasution left the benchmark interest rate unchanged at 6 percent last month and the next policy meeting is on Jan. 12.
The rupiah weakened 0.5 percent to 9,185 per dollar.
To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net
To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net
