BLBG:Dollar Index Near 7-Month High Before Retail Sales Data
The Dollar Index (DXY) rose toward a seven-month high before a report tomorrow that may show U.S. retail sales improved last month, fanning speculation the Federal Reserve will scale back monetary stimulus.
The yen touched a 3 1/2-year low as Bank of Japan (8301) deputy governor nominee Kikuo Iwata said decisive monetary easing is needed. The currency trimmed earlier declines as Asian stocks slid, boosting demand for refuge assets. The pound fell toward the lowest since 2010 ahead of U.K. factory data today.
“The U.S. economy has got momentum,” said Imre Speizer, a strategist at Westpac Banking Corp. in Auckland, Australia’s second-biggest lender. “Good U.S. news will support the U.S. dollar more so these days.”
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback versus the currencies of six U.S. trading partners, advanced 0.2 percent to 82.710 as of 7:10 a.m. in London. It reached 82.924 on March 8, the highest since August.
The dollar gained 0.2 percent to $1.3021 per euro. The yen fell 0.2 percent to 96.49 per dollar after earlier touching 96.71, the weakest since August 2009. It was little changed at 125.64 per euro.
The MSCI Asia Pacific Index (MXAP) of shares dropped 0.5 percent, snapping a two-day winning streak.
The Commerce Department will probably say tomorrow that U.S. retail sales increased 0.5 percent in February from a month earlier when it rose 0.1 percent, according to a Bloomberg News survey of economists.
Dollar’s Gains
The Fed currently purchases $85 billion in Treasury and mortgage debt a month under so-called quantitative easing to support economic growth.
The dollar has climbed 3.2 percent this year, the best performance after Sweden’s krona among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen was the biggest loser with an 8.3 percent tumble.
Iwata, an economics professor at Gakushuin University in Tokyo, told lawmakers today that the BOJ can meet its 2 percent inflation target in two years by buying bonds. Haruhiko Kuroda, the governor nominee, said yesterday the BOJ’s existing asset- purchase program isn’t enough to achieve the goal.
A policy group from the opposition Democratic Party of Japan will advise rejecting Iwata for the deputy job, two party officials said, asking not to be named ahead of an official announcement. The DPJ’s fiscal policy council will recommend backing Kuroda as governor and Hiroshi Nakaso for another deputy position, the officials said.
BOJ Expectations
Minutes released today of the BOJ’s meeting last month showed some board members said that buying longer-maturity Japanese government bonds and increasing purchases of risk assets are options for the central bank.
“Expectations are running ahead, and they will eventually peel off,” said Masashi Murata, a currency strategist in Tokyo at Brown Brothers Harriman & Co. “We’re unlikely to see anything surprising anytime soon, even after the BOJ’s new leadership is installed, and that will give a catalyst to buy the yen.”
The pound lost 0.1 percent to $1.4893 after touching $1.4866 yesterday, the weakest since June 2010. That means the currency may be in for a “strong downtrend,” Bank of Nova Scotia strategists Camilla Sutton and Eric Theoret wrote in a report yesterday, even as its relative strength index indicates that recent declines may have been too rapid.
Sterling’s 14-day RSI dropped to 22, below the 30 level that some traders see as a sign an asset has fallen too far, too fast and may be due to reverse course.
U.K. manufacturing production probably stagnated in January following a 1.6 percent jump in December, economists forecast before today’s report.
“Any negative surprises from industrial production figures due today may potentially trip the pound further,” Emmanuel Ng, a currency strategists at Oversea-Chinese Banking Corp. in Singapore, wrote in a research note. The U.K. currency “may continue to remain on a slippery slope.”
To contact the reporters 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
