BLBG: Dollar Falls Versus Yen After Durable Goods Drop; Rupee Slides
The dollar weakened for the first time in four days against the yen as orders for U.S. durable goods fell more than forecast in July after three months of increases.
The Bloomberg U.S. Dollar Index erased a gain as investors weighed whether the world’s biggest economy is strong enough to support a reduction in Federal Reserve stimulus next month. India’s rupee declined toward a record low set last week after a newspaper reported the finance minister ruled out increasing interest rates. The New Zealand dollar strengthened for the first time in six days.
“It looks like the market is starting to get hit by some negative surprises,” Sebastien Galy, a senior currency strategist at Societe Generale SA, said by phone from New York. “It seems the long dollar-yen position will be squeezed a bit more.” A long position is a wager an asset, in this case the dollar, will appreciate in value.
The dollar dropped 0.3 percent to 98.39 yen at 8:59 a.m. in New York after strengthening 1.2 percent last week. The U.S. currency was little changed at $1.3387 per euro after appreciating 0.4 percent last week. The euro fell 0.3 percent to 131.70 yen.
Financial markets are closed in London today due to a public holiday.
Bookings for goods meant to last at least three years decreased 7.3 percent, the most since August 2012, after a 3.9 percent gain in June, the Commerce Department said today in Washington. The median forecast of economists surveyed by Bloomberg called for a 4 percent drop. Orders waned for aircraft and capital goods such as computers and electrical equipment.
Fed Purchases
The Fed’s debate over when it will slow its $85 billion in monthly bond purchases known as quantitative easing has roiled global financial markets over the past three months. U.S. policy makers hold their next meeting on Sept. 17-18.
“The U.S. dollar will be driven by key data as the market reassesses the possibility that the Fed will taper in September,” said Roberto Mialich, senior currency strategist at UniCredit SpA in Milan. “It is likely to trade in a narrow range until we get a clearer picture.”
The Bloomberg U.S. Dollar Index fell 0.1 percent to 1,025.25 after gaining 0.2 percent. It advanced to 1,031.37 on Aug. 22, the highest since Aug. 2.
The dollar has strengthened 4.8 percent this year, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-market currencies. The euro was the best performer, rising 6.6 percent, while the yen slumped 8.8 percent.
‘Exert Effects’
The yen rose against all except the kiwi among its 16 major peers today after Bank of Japan Governor Haruhiko Kuroda said in Jackson Hole, Wyoming, on the weekend that the BOJ’s bond purchases have started to “exert effects” on the economy.
Kuroda said the push has helped boost stock prices and restrain bond yields, while supporting bank lending and bolstering confidence among consumers and businesses.
India’s rupee fell for the seventh time in eight days after Finance Minister Palaniappan Chidambaram was reported by the Times of India on the weekend as saying it was too early to comment on the result of measures to halt the currency’s slide.
Economic growth in Asia’s third-largest economy slowed to 4.6 percent in the second quarter, from 4.8 percent in the previous three months, according to a Bloomberg survey before the data is released on Aug. 30.
Rupee Pressure
“The rupee’s losses are part a reflection of broad emerging-market vulnerability to the Fed unwinding its QE, and part a product of local structural and cyclical problems,” Tim Fox, chief economist at Emirates NBD in Dubai, wrote today in a note to clients. With “Indian GDP data expected to remain weak,” the rupee will stay under pressure, he said.
The rupee slumped 1.5 percent to 64.3063 per dollar after depreciating to a record-low 65.56 on Aug. 22.
The New Zealand dollar advanced 0.9 percent to 78.70 U.S. cents after sliding to 77.62 cents on Aug. 23, the weakest level since Aug. 5.
New Zealand’s imports exceeded exports by NZ$774 million ($609 million) in July, the statistics bureau said today. That compares with the forecast of a NZ$16 million deficit in a Bloomberg survey.
To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; Andrea Wong in New York at awong268@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
