BLBG:Dollar Approaches 3 1/2-Year High on U.S. Growth Pickup
The dollar approached the strongest since August 2009 versus the yen as signs the American economy is gaining momentum boosted demand for the U.S. currency.
The Dollar Index (DXY) traded within 0.2 percent of the highest in seven months before reports this week that economists said will show retail sales improved in February and consumer prices increased. Hungary’s forint slid to a nine-month low versus the euro on concern central bank President Gyorgy Matolcsy is concentrating power in a bid to reshape monetary policy making. South Korea’s won weakened after the North threatened to target the South’s incoming defense minister.
“There are still some headwinds in the U.S. economy coming from its fiscal outlook but the recent data suggested the economic recovery is probably robust enough to accommodate the fiscal setback,” said Jane Foley, a senior foreign-exchange strategist at Rabobank International in London. “That should be positive for the dollar.”
The dollar rose 0.1 percent to 96.08 yen at 7:50 a.m. in New York after climbing to 96.55 on March 8, the highest level since Aug. 11, 2009. The U.S. currency gained 0.1 percent to $1.2999 per euro. The yen was little changed at 124.89 per euro after sliding to 125.92 on March 8, the weakest since Feb. 14.
Rabobank predicts the dollar will strengthen to $1.28 per euro in three months, compared with its previous forecast of $1.30, Foley said.
Retail Sales
U.S. retail sales rose 0.5 percent in February after a 0.1 percent gain in January, according to a Bloomberg News survey before the Commerce Department data on March 13. A separate report on March 15 will show the consumer-price index climbed 0.5 percent, after being little changed in January. The jobless rate fell to a four-year low of 7.7 percent, the Labor Department said last week.
The threat of across-the-board cuts in government spending -- known as sequestration -- failed to deter households, economists said.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trade partners, gained 0.1 percent to 82.78 after climbing to 82.924 on March 8, the highest since Aug. 3.
The dollar has appreciated 3.4 percent this year, the best performer after Sweden’s krona of the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, on speculation stronger U.S. growth will prompt the Federal Reserve to reduce the pace of bond purchases. The euro rose 1.7 percent, while the yen tumbled 7.7 percent.
‘Drastic Changes’
The forint slid the most since December after Matolcsy stripped two of his deputies appointed under a previous government of some of their powers on March 8. He shifted responsibility to Adam Balog, a vice president appointed by Prime Minister Viktor Orban’s cabinet this month.
Investors interpreted the decision “as evidence that drastic changes in the monetary policy toolkit would be announced soon,” weakening the forint, Mariann Trippon, a Budapest-based economist at Intesa Sanpaolo SpA’s CIB unit, wrote in a research report today.
The forint slid 1.3 percent to 303.29 per euro after weakening to 303.61, the lowest since June 4. The currency fell as much as 1.4 percent, the most since Dec. 21.
The won fell to the lowest since October against the dollar after North Korea’s Committee for the Peaceful Reunification of Korea said it would target the South incoming defense minister.
Kim Byung Kwan, a former general who commanded the U.S.- South Korea Combined Forces, will be the “first target in the great war for national reunification,” the committee said in a statement carried by the official Korean Central News Agency yesterday. Kim said in his March 8 confirmation hearing the South will respond to a North Korean artillery attack by toppling the regime, Yonhap News reported.
‘Selling Pressure’
“The won is coming under selling pressure as the North Korean threat prompts dollar buying,” said Jeon Seung Ji, a currency analyst at Samsung Futures Inc. in Seoul. “Some exporters are waiting to settle their deals near the level, which may provide some buffer to the won.”
The won dropped 0.4 percent to close at 1,095 per dollar after sliding to 1,102.65, the lowest since Oct. 25.
The yen weakened versus most of its 16 major counterparts after Japan’s Cabinet Office said machine orders fell 13.1 percent in January, exceeding the median forecast in a Bloomberg survey for a 1.7 percent decline.
Haruhiko Kuroda, the nominee for central bank governor, told Japanese lawmakers today the central bank should consider buying large amounts of longer-maturity debt to achieve its 2 percent inflation target as soon as possible. The yen won’t weaken forever amid expectations for more easing, he said.
“There are expectations for further monetary easing because of the stance that Kuroda has shown, while people are starting to look to a possible exit strategy in the U.S. amid the mild economic recovery,” said Kengo Suzuki, a currency strategist at Mizuho Securities Co. in Tokyo. “The prevailing atmosphere is higher risk appetite and a weaker yen.”
To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
