BLBG:Dollar Declines Before Bernanke Senate Testimony Today
The dollar fell against most major peers amid speculation Federal Reserve Chairman Ben S. Bernanke will hint at further monetary easing in testimony today.
The greenback slid for a third day versus the euro after an unexpected drop in U.S. retail sales rekindled prospects the Fed will introduce additional steps to support the world’s largest economy. The 17-nation euro was 0.2 percent from the lowest in more than three years against the pound before German data that may signal deteriorating investor confidence. Australia’s dollar climbed as Asian stocks rose and after the Reserve Bank released today minutes of this month’s meeting.
“There is market positioning for Bernanke to deliver something today,” said Joseph Capurso, a strategist in Sydney at Commonwealth Bank of Australia (CBA), the nation’s biggest lender. “There is a high risk of more policy easing before the end of this year.”
The dollar lost 0.1 percent to $1.2283 per euro as of 6:47 a.m. in London from the close in New York yesterday. It traded at 78.93 yen after losing 1.1 percent in the past three sessions to 78.87. The yen fell 0.2 percent to 96.96 per euro. The common currency was at 78.47 pence after touching 78.32 yesterday, the lowest since October 2008.
The MSCI Asia Pacific Index (MXAP) of shares advanced 0.4 percent.
Bernanke will deliver his semiannual report on the economy and monetary policy to the Senate Banking Committee. He will testify to the House Financial Services Committee tomorrow.
U.S. Economy
Fed Bank of Kansas City President Esther George said in a speech that the U.S. economy probably won’t grow much faster than 2 percent this year, held back by caution among consumers and businesses.
A Labor Department report may show today that the consumer- price index was unchanged last month from May when it slid 0.3 percent, according to the median estimate of economists surveyed by Bloomberg News. U.S. retail sales fell 0.5 percent in June, Commerce Department figures showed yesterday, whereas economists had forecast a 0.2 percent gain.
“If we don’t see continued improvement in the labor market, we’ll be prepared to take additional steps if appropriate,” Bernanke said on June 20. “Additional asset purchases would be among the things that we would certainly consider.”
The Fed bought $2.3 trillion of bonds in two rounds of so- called quantitative easing from 2008 to 2011, seeking to cap borrowing costs and stimulate the economy. Last month, it expanded the program known as Operation Twist that replaces short-term Treasuries in its portfolio with longer-term debt.
German Sentiment
The ZEW Center for European Economic Research may say today that its index of German investor and analyst expectations slid to minus 20 this month, according to the median estimate of economists. That would be the lowest since January and down from minus 16.9 in June. The gauge aims to predict economic developments six months in advance.
The euro has fallen 3.7 percent in the past three months, the worst performer along with the Swiss franc among the 10 developed-nation currencies tracked by Bloomberg Correlation- Weighted Indexes. The yen was the biggest winner with a 6.5 percent jump, followed by a 3.7 percent advance by the dollar.
“The euro will remain on a downtrend in the medium to long term,” said Yuki Sakasai, a currency strategist at Barclays Plc in New York. “Compared with the U.S., the euro region’s economy has more scope for monetary easing and is more prone to downside risks.”
‘Speculative’ Gains
Japan’s currency halted a three-day advance versus its U.S. counterpart after touching 78.69 yesterday, the strongest since June 18. Japanese Finance Minister Jun Azumi said at a press conference today gains in the yen were “speculative” and officials will “take decisive action if needed.”
“The threat of officials intervening in Japan’s currency market always remains,” said Sacha Tihanyi, a senior currency strategist at Scotiabank in Hong Kong, a unit of the Bank of Nova Scotia. (BNS) “They’ve done it in the past. I think the credibility is there that they’ll do it again.”
The Australian dollar strengthened against all of its 16 major peers, adding 0.5 percent to $1.0296.
“Consumption was being supported by a favorable labor market,” the central bank said in minutes of its July 3 policy meeting released today. “With recent signs that the domestic economy had a little more momentum than had earlier been indicated, members saw no need for any further adjustment to the cash rate.”
Singapore’s currency rose for a third day after non-oil domestic exports climbed more than expected in June from a year earlier, according to a report today. The local dollar added 0.1 percent versus its U.S. counterpart to S$1.2624.
The greenback may advance against Singapore’s dollar to initially target S$1.2749 should it sustain gains above S$1.2608, according to Winston Tang, a Singapore-based technical analyst at Forecast Pte.
The S$1.2608 level is the base of the currency’s trading range in the past 2 1/2 weeks, Tang said. S$1.2749 is the U.S. currency’s strongest level this month, according to data compiled by Bloomberg.
To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net.
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
