BLBG:Dollar, Yen Fall As Crisis-Response Bets Damp Haven Bid
The dollar and yen slid versus most of their major peers and stocks advanced amid speculation the world’s leading economies will collaborate on a response to Europe’s crisis, damping demand for haven assets.
The Dollar Index fell after Federal Reserve Bank of Chicago President Charles Evans said recent U.S. economic data warrant “extremely strong accommodation.” The euro extended a three- day gain versus the yen as Japan’s Finance Minister Jun Azumi said he urged European leaders to do more to address investors’ concerns about the region’s finances. Australia’s dollar climbed following a report showing the nation’s economy grew more than forecast.
“Higher stocks are likely to lead to some selling in the safe-haven currencies” such as the dollar and yen, said Daisaku Ueno, a senior foreign-exchange and fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo., a unit of Japan’s biggest listed bank. “The markets have been excessively risk averse.”
The dollar lost 0.4 percent to $1.2503 per euro at 8:45 a.m. London time. The U.S. currency added 0.4 percent to 79.08 yen. The euro gained 0.9 percent to 98.93 yen. The Australian currency climbed 1.2 percent to 98.54 U.S. cents and 1.7 percent to 77.99 yen.
The Stoxx Europe 600 index of shares rose 1 percent, while the MSCI All-Country World Index added 0.5 percent.
G-7 Coordination
Group of Seven finance ministers and central bank governors agreed to help Spain and Greece place their public finances on a sustainable footing, Japan’sAzumi told reporters in Tokyo following a conference call yesterday.
The Dollar Index (DXY), which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, fell 0.3 percent to 82.542.
“Finding a way to deliver more accommodation -- whether it is monetary or fiscal -- is particularly important now because delays in reducing unemployment are costly,” Evans said in a speech yesterday in New York. “Failure to act aggressively now will lower the capacity of the economy for many years to come.”
Chairman Ben S. Bernanke said in April the Fed may provide more easing should unemployment fail to make “sufficient progress towards its longer-run normal level.” The U.S. central bank will release its Beige Book business survey today, before its next policy meeting on June 19-20.
The dollar has gained 4.1 percent in the past six months, the best performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro was the worst performer, losing 3.7 percent.
ECB Meeting
European Central Bank policy makers will meet today to decide on the euro region’s borrowing costs. Out of 60 economists surveyed by Bloomberg News, 48 predict no change to the bank’s record-low 1 percent rate. The rest forecast a decline of at least 25 basis points, or 0.25 percentage point, to 0.75 percent.
“While the outcome is by no means clear-cut and not pre- warned by the ECB, a rate cut would at least help to alleviate a little of the pain in Europe,” Mitul Kotecha, head of global currency strategy in Hong Kong at Credit Agricole Corporate & Investment Bank, wrote in an e-mailed note today. “The fact that the euro-dollar has a reasonably strong correlation with interest-rate differentials over the past three months suggests that the euro will actually come under pressure in the wake of such a move.”
Australian GDP
The Australian dollar strengthened versus the greenback and yen after a report today showed gross domestic product climbed 1.3 percent in the three months through March, more than twice the pace economists forecast in a Bloomberg survey. The Reserve Bank of Australia lowered its key interest rate yesterday by 25 basis points to 3.5 percent.
The yen slid for a third day against the dollar after Japan’s Azumi indicated that G-7 nations remain supportive of intervention to address extreme currency moves.
The yen has strengthened about 6 percent since March 15, when it reached its weakest level in almost a year. Azumi said yesterday he told his counterparts a strong yen was depressing Japan’s stock market and damaging its economy by making exports more expensive.
“Recent rhetoric suggests that Japan may be inclined to intervene” below the 78 yen per dollar level, said Greg Gibbs, a senior currency strategist at Royal Bank of Scotland Group Plc in Sydney. “After a significant correction from the dollar’s high above 84 yen since March, long positions have been pared back to negligible levels and the government is likely to have success in defending 78.”
A long position is a bet that an asset’s price will rise.
To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net
To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net
