BLBG:Dollar Climbs to 7-Month High Above 80 Yen as U.S. Economy to Strengthen
The dollar rose to a seven-month high of more than 80 yen on speculation signs of growth in the U.S. economy will reduce the case for more so-called quantitative easing by the Federal Reserve.
The U.S. currency gained for a fifth day before a report economists said will show sales of existing U.S. homes increased for a fourth month. The euro reached a three-month high versus the yen as the Greek government sent debt-swap and austerity measures to parliament for approval after winning a second aid package yesterday. Norway’s krone climbed as crude oil reached a nine-month high.
“The stronger the U.S. economy, the stronger the sense that the interest-rate story will turn around and some of the strength in the yen relative to the U.S. dollar starts to reverse course,” said Gavin Stacey, a strategist at Barclays Capital in Sydney. “The risk-on tone is seeing some of the yen strength dissipate.”
The dollar rose 0.6 percent to 80.24 yen at 9:12 a.m. London time, after trading at 80.30 yen, the strongest level since July 12. The greenback is poised for its longest series of daily advances since April. The euro advanced 0.5 percent to 106.07 yen, after reaching 106.33 yen, the highest since Nov. 14. The 17-nation currency was little changed at $1.3222.
Sales (ETSLTOTL) of previously owned homes in the U.S. probably rose 1.1 percent in January to a 4.66 million annual rate, the highest level since May 2010, according to the median estimate of economists surveyed by Bloomberg News before the National Association of Realtors releases its data today.
Greek Bailout
Euro-area finance ministers awarded 130 billion euros in aid to Greece and reached an accord for greater debt relief from investor representatives to tide the nation past a bond redemption next month.
Greece’s government agreed to deeper austerity efforts, a voluntary debt swap known as private-sector involvement, and collective action clauses for bonds. Legislation needed to carry out those measures was submitted to lawmakers and posted on the Greek parliament’s website.
“We should have a bit of positive sentiment for the euro over the rest of this week as the market still seems a little short,” said Matthew Brady, executive director for foreign exchange at JPMorgan Chase & Co. in Sydney. “We will at some stage this week test $1.34 on the euro just to flush out some of the short positioning.” A short position is a bet an asset will decline in value.
Euro Shorts
Futures traders increased wagers that the euro will decline against the dollar, figures from the Washington-based Commodity Futures Trading Commission showed last week. The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain -- so- called net shorts -- was 148,641 on Feb. 14, compared with 140,593 a week earlier.
The euro has climbed 0.8 percent in the past week, the second-biggest advance after the krone among 10 developed nation peers tracked by Bloomberg Correlation Weighted Indexes. The dollar has weakened 0.6 percent and the yen has dropped 3 percent over the same period.
The currency of Norway, the world’s seventh-largest oil exporter, rose 0.4 percent to 5.6722 per U.S. dollar today. Oil for April delivery was little changed at $105.92 in electronic trading on the New York Mercantile Exchange. Front-month prices advanced 2.5 percent yesterday to the highest close since May 4.
Japanese Easing
The implied volatility of three-month options for Group of Seven currencies fell as low as 9.94 percent yesterday, the least since Feb. 14, and was at 9.96 percent today, according to the JPMorgan G7 Volatility Index. A decrease makes investments in currencies with higher benchmark rates more attractive because it shows the risk is less that market moves will erase profits on such trades.
The Bank of Japan on Feb. 14 unexpectedly expanded its asset-purchase program to 30 trillion yen from 20 trillion, with 19 trillion yen set aside for government bonds. The central bank also said it will target 1 percent inflation “for the time being.” The nation’s consumer prices fell at a 0.2 percent annual rate in December, government data show.
BOJ Governor Masaaki Shirakawa today told Japanese lawmakers that policy makers set a price target in order to show the central bank’s resolve and that they will continue to take steps to end deflation.
“Japan has come out and done their own quantitative easing,” said Barclays Capital’s Stacey. “The surprise QE announcement from the central bank in Japan is weighing on recent yen weakness.”
Nomura Holdings Inc., Japan’s biggest brokerage, raised its first quarter forecast for the dollar to 79 yen, according to a research note published yesterday. Its previous projection was for the currency to be at 75 yen.
To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Keith Jenkins in London at Kjenkins3@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
