BLBG:Yen Rebounds From 6-Month Low on Bets Decline Overdone
The dollar rose for the first time in three days versus the euro as investors sought haven assets amid concern President Barack Obama’s talks with U.S. lawmakers to avert the so-called fiscal cliff will stall.
The Dollar Index extended its fourth weekly advance before a report economists said will show U.S. industrial production expanded at a slower pace last month. The yen strengthened against all but one of its major counterparts amid speculation this week’s drop was too rapid. Switzerland’s franc fell after Swiss National Bank President Thomas Jordan said the currency remains high, putting a strain on the economy.
Obama “is meeting congressional leaders today and those discussions are unlikely to get anywhere on resolving the fiscal cliff,” said Michael Derks, chief strategist at FxPro Group Ltd. in London. “Bids for the dollar will continue because of risk aversion related to this.”
The dollar climbed 0.4 percent to $1.2732 per euro at 11 a.m. London time. It was little changed at 81.12 yen, leaving its weekly advance at 2.1 percent. The greenback touched 81.46 yen yesterday, the strongest level since April 25. The Japanese currency gained 0.4 percent to 103.30 per euro, poised for a 2.2 percent slide this week.
The Dollar Index (DXY), which is used to track the greenback versus the currencies of six U.S. trading partners, rose 0.2 percent to 81.231, extending its weekly advance to 0.2 percent.
Short-Term Shock
If the U.S. Congress doesn’t act by the end of the year, $607 billion in spending cuts and tax increases are scheduled to take effect starting in January, while the $16.4 trillion debt ceiling must be raised before it’s reached early next year for the nation to continue to borrow.
Obama will meet Democratic and Republican congressional leaders today for an opening round of talks. Lawmakers of both parties want to avoid a short-term shock to the economy while making progress on long-term deficit reduction.
Output at U.S. factories, mines and utilities rose 0.2 percent in October, after gaining 0.4 percent in the prior month, according to the median estimate of 84 economists in a Bloomberg News survey before the data release today.
The dollar has advanced 1.8 percent in the past month, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The yen dropped 1.4 percent and the euro fell 1 percent.
Japan Elections
The yen still headed for its steepest weekly drop against the dollar since June on prospects Japan’s opposition party will take power after elections next month and increase pressure on the central bank to expand monetary easing.
The 14-day relative strength index for the yen against the dollar fell to 31 yesterday, near the 30 level that some traders see as a sign that an asset price may reverse course.
“The yen’s retracing very rapid moves over the last couple of days,” said Greg Gibbs, a senior currency strategist at Royal Bank of Scotland Group Plc in Singapore. “There’s certainly pause for thought.”
Europe’s shared currency headed for weekly advances against the dollar and the yen.
Euro-area finance ministers will meet in Brussels on Nov. 20 to discuss ways of plugging the funding gap resulting from granting Greece an extension to reach budget-deficit goals in its bailout program.
‘Some Relief’
“The focus is on Greece and its funding,” said Ulrich Leuchtmann, head of currency strategy at Commerzbank AG in Frankfurt. “If we see a solution on Greece at the meeting next week then we might see some relief in the euro.”
Europe’s shared currency is likely to stay above its 100- day moving average at $1.2648, analysts at Landesbank Hessen- Thueringen in Frankfurt including Ralf Umlauf wrote in a note to investors today. The currency, which reached a two-month low against the dollar this week, is oversold, according to a stochastic technical indicator, the strategists said, and therefore may stabilize around current levels.
The stochastic oscillator was at 10 today, according to data compiled by Bloomberg, below the 30 threshold that signals the currency may have depreciated too quickly and is poised for a rebound.
A stochastic oscillator chart measures the closing price of a security relative to its highs and lows during a particular period to try to predict whether it will rise or fall.
The Swiss franc fell against the dollar and was little changed against the euro.
The SNB introduced a ceiling of 1.20 francs per euro in September 2011 after the currency rose to a record, hurting exporters.
“At its current rate, the Swiss franc remains high and is weighing on the Swiss economy,” Jordan said in Zurich today, according to a copy of his speech. “The minimum exchange rate against the euro will continue to apply” as the reasons for setting it “retain their validity.”
The franc fell 0.4 percent to 94.57 centimes per dollar and was little changed at 1.2044 versus the euro. It touched 1.2035 on Nov. 14, the strongest since Sept. 12.
To contact the reporters on this story: Emma Charlton in London at echarlton1@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net.
