BLBG:Dollar Remains Lower Versus Euro as Fed Concludes Meeting
The dollar remained lower versus the euro after a two-day decline, with the Federal Reserve expected to announce today an expansion of asset purchases that tend to weaken the U.S. currency.
The greenback slid versus most of its 16 major counterparts yesterday amid speculation the Fed will add Treasury purchases to an existing program that buys $40 billion in mortgage bonds each month. The euro was supported ahead of meetings of European Union finance ministers and heads of government this week, while Greece met its bond buyback target. The Japanese currency fell against all of its peers after North Korea launched a rocket.
“The bias is for the dollar to be sold,” said Kengo Suzuki, a currency strategist in Tokyo at Mizuho Securities Co., a unit of Japan’s third-largest bank by market value. “The Fed seems to have no intention to relax its easing stance.”
The dollar was little changed at $1.3006 per euro as of 6:55 a.m. in London after falling 0.6 percent over the previous two days. It gained as much as 0.3 percent to 82.74 yen before trading at 82.73 from 82.52 in New York. Europe’s shared currency added 0.3 percent to 107.60 yen after rising 0.7 percent yesterday, the biggest one-day gain since Nov. 21.
The Federal Open Market Committee will probably announce $45 billion in monthly Treasury buying that would push its balance sheet almost to $4 trillion, according to the median estimate in a Bloomberg News survey of 49 economists. It concludes a two-day policy meeting today.
Further Buying
The purchases would follow the expiration at year-end of the so-called Operation Twist program which aims to lengthen the average maturity of the Fed’s holdings. The U.S. central bank pumped $2.3 trillion into the financial system from 2008 to 2011 in two rounds of the stimulus strategy called quantitative easing, or QE.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against currencies of six U.S. trading partners, may test the “crucial support area” of 79 to 78.70, Roelof-Jan van den Akker, an Amsterdam-based technical analyst at ING Groep NV (INGA), wrote in an e-mailed note to clients yesterday. The gauge was little changed at 80.09 after dropping below its 50-day moving average at 80.20 yesterday when it slid as much as 0.4 percent to 80. The 78.70 level was last seen on Sept. 14, when the index touched a low of 78.60.
Monthly Drop
The dollar lost 1.4 percent in the past month, the second- biggest drop among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen had the largest decline, falling 5.6 percent. The euro gained 1.1 percent.
EU leaders gathering tomorrow in Brussels will debate a road map for the overhaul of the euro region, including increased powers to intervene in national budgets and the establishment of a single banking supervisor.
An official from Greece’s Finance Ministry said yesterday investors tendered Greek bonds with a face value of more than 31 billion euros ($40 billion), meeting a goal that’s crucial to unlocking aid from the EU and the International Monetary Fund. Euro-area finance ministers discussed the transaction on a conference call yesterday, concluding that no insurmountable obstacles remain to the next disbursement of aid to the nation, according to a European official who spoke on the condition of anonymity.
Rocket Launch
The yen fell as much as 0.2 percent against the dollar after the Japanese government said North Korea launched a rocket at about 9:49 a.m. Japan time, and it headed in a southerly direction, passing over Okinawa, before falling into the sea east of the Philippines.
“Yen selling was limited after the headlines on North Korea’s rocket launch,” said Junichi Ishikawa, an analyst at IG Markets Securities Ltd. in Tokyo. “Though you would think geopolitical risk, on top of recent political developments in Japan, would be negative for the yen.”
The Australian dollar climbed to the highest in more than two months as Asian stocks advanced, boosting demand for higher- yielding assets. The so-called Aussie bought $1.0534 after earlier touching $1.0541, the strongest since Sept. 17. The MSCI Asia Pacific Index of shares added 0.5 percent.
Australia’s Bureau of Resources and Energy Economics forecast in a report today that prices for iron ore, the South Pacific naton’s top export, will average $106 a metric ton in 2013, compared with a September estimate of $101 a ton. The cost of the metal climbed yesterday to $124.90 a ton, the most since July 20, according to a gauge compiled by The Steel Index Ltd.
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: Rocky Swift at rswift5@bloomberg.net
