BLBG:Dollar Declines as Signs of Production Growth Reduce Demand for Safe Haven
The dollar fell against most major peers before a report forecast to show a U.S. manufacturing index rose for a fourth month and after a similar gauge in China was stronger than expected, sapping demand for haven assets.
Higher-yielding currencies including the Australian and New Zealand dollars snapped declines after Japanese companies’ capital spending jumped by the most in almost five years in the fourth quarter, brightening the outlook for global growth. Demand for the euro was limited before European Union leaders meet in Brussels today to discuss the region’s debt crisis.
“Manufacturing is picking up across the globe,” said Justin Harper, head of research in Singapore at IG Markets. “Risk-on sentiment is definitely on the table at the moment,” weighing on haven currencies such as the dollar.
The dollar was little changed at $1.3337 per euro as of 6:59 a.m. in London from the close in New York yesterday. The U.S. currency lost 0.1 percent to 81.09 yen. The yen was unchanged at 108.13 per euro.
The Institute for Supply Management’s factory index in the U.S. rose to an eight-month high of 54.5 in February from 54.1 in January, according to the median estimate of economists surveyed by Bloomberg News before the data today. Readings above 50 signal growth. A separate report today may show consumer purchases in the world’s largest economy increased 0.4 percent in January.
‘Moderate’ Growth
The U.S. expanded at a “modest to moderate pace” in January and early February, fueled by manufacturers, including automakers, the Fed said yesterday in its Beige Book business survey.
China’s purchasing managers’ index rose to 51.0 last month from 50.5 in January, the nation’s statistics bureau and logistics federation said in a statement today. China is Australia’s biggest trading partner and New Zealand’s second- largest export destination.
“The stabilization of the numbers would support the idea that China’s in for a soft economic landing,” said Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong.
Australia’s dollar gained 0.1 percent to $1.0737. New Zealand’s currency was unchanged at 83.41 U.S. cents.
Japan’s capital spending excluding software rose 4.9 percent from a year earlier in the final three months of 2011, after declining 11 percent in the previous quarter, the Finance Ministry said today.
EU Summit
The EU said “serious action” is needed to revive economic growth across the region, according to an issues paper prepared for the two-day summit. As EU leaders grapple with how to overhaul and jump-start their economies, the Brussels meeting will focus on growth and postpone discussion of Europe’s financial-crisis firewall.
Luxembourg Prime Minister Jean-Claude Juncker backed combining the EU’s temporary rescue fund with a permanent bailout facility that comes online later this year, after German objections derailed a decision this week.
“There are still concerns about Europe’s situation,” said Kengo Suzuki, a foreign-exchange strategist in Tokyo at Mizuho Securities Co., a unit of Japan’s No. 3 listed bank by market value. “I’m bearish the most on the euro among the major currencies.”
Suzuki said the euro may fall toward $1.25 by June 30.
The yen has lost 6.5 percent in the past three months, the worst performer among the 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar declined 2.1 percent and the euro has fallen 3 percent.
To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net.
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
