BLBG:Dollar Falls Versus High-Yield Currencies Before U.S. Manufacturing Report
The dollar fell against higher- yielding currencies before a U.S. report forecast to show manufacturing in the world’s largest economy accelerated this month, reducing demand for haven assets.
The greenback declined the most against the Norwegian krone and South African rand after Chinese factory output expanded and Japanese companies’ capital spending jumped by the most in almost five years, improving the outlook for global growth. The euro fell versus most of its major counterparts after the European Commission said Ireland needs more spending cuts to meet deficit targets.
“Manufacturing is picking up across the globe,” said Justin Harper, head of research in Singapore at IG Markets Ltd. “Risk-on sentiment is definitely on the table at the moment,” weighing on haven currencies such as the dollar.
The U.S. currency dropped 0.5 percent to 5.5659 krone at 9:27 a.m. in London, and weakened 0.6 percent to 7.4588 rand. The greenback fell 0.1 percent to $1.3338 per euro and was little changed at 81.12 yen. The euro was little changed at 108.05 yen after depreciating 0.2 percent yesterday.
The Institute for Supply Management’s U.S. factory index rose to an eight-month high of 54.5 in February from 54.1 in January, according to economists surveyed by Bloomberg News before today’s data. Readings above 50 signal growth. A separate report today will show U.S. personal spending increased 0.4 percent in January, another Bloomberg survey showed.
‘Moderate Pace’
The U.S. grew at a “modest to moderate pace” in January and early February, fueled by manufacturers, the Fed said yesterday in its Beige Book business survey.
China’s purchasing managers’ index rose for a third month in February, to 51 from 50.5 in January, the statistics bureau and logistics federation said today. Japanese capital spending excluding software climbed 4.9 percent last quarter from a year earlier, after declining 11 percent in the previous three months, the Finance Ministry said in Tokyo.
The Dollar Index (DXY), which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, fell 0.1 percent to 78.753. The gauge slid to 78.095 yesterday, the lowest since Dec. 2.
Benchmark rates are 1.75 percent in Norway and 5.5 percent in South Africa compared with the U.S. rate of between zero and 0.25 percent.
The euro fell versus 11 of its 16 major counterparts after a second round of loans to financial institutions from the European Central Bank yesterday failed to bring down Portuguese bond yields.
Ireland Deficit
The 17-nation currency erased earlier gains versus the dollar as documents supplied to German lawmakers showed the European Commission urged Ireland to reassess its deficit forecasts later this year. The European Central Bank allotted 529.5 billion euros in loans to euro-area banks yesterday.
“The euro is under pressure despite the successful liquidity operation by the ECB as the market judges that the contagion risk is still very much alive,” said Jane Foley, a senior currency strategist at Rabobank International in London. “The fact that Portuguese yields keep rising despite the ECB measures fuels speculation it might need a second bailout. It showed these measures just papered over the cracks.”
European Union leaders will meet in Brussels today to discuss the regional debt crisis.
To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
