BLBG:Dollar Poised for Weekly Drop on Fed Taper Delay; Won Advances
The dollar was set for its biggest weekly drop versus the euro in a month as Federal Reserve officials signal a delay in reducing stimulus before data next week economists said will show home sales (ETSLMOM) fell in September.
The Bloomberg U.S. Dollar Index reached an eight-month low after a deal by Congress extended funding and debt-limit deadlines into next year and ended a partial government shutdown. South Korea’s won climbed to a nine-month high amid demand for higher-yielding assets. The yuan reached a record high after data showed China’s economic growth accelerated for the first time in three quarters. Australia’s currency headed for its biggest weekly advance in six weeks.
“People are putting in place calls that the Fed may not taper until March, which is a significant change,” said Jane Foley, a senior currency strategist at Rabobank International in London. “We’ve had the Chinese data overnight which is a pretty good number and that’s pushed up the Aussie. If China is growing nicely and the Fed is doing more stimulus, then it helps lift appetite for higher-yielding assets. The dollar should weaken versus the euro.”
The dollar was little changed at $1.3690 per euro as of 8:52 a.m. London time after reaching $1.3692, the weakest since Feb. 1. It has dropped 1.1 percent since Oct. 11, the most since the period ended Sept. 20. The U.S. currency was little changed at 97.98 yen. The euro climbed 0.2 percent to 134.13 yen after reaching 134.19, the strongest level since Sept. 23.
Dollar Index
The Bloomberg U.S. Dollar Index, which tracks the U.S. currency against 10 other major currencies, was little changed at 1,002.39, after falling to 1,002.08, the lowest since February. The gauge has dropped 1 percent this week.
Chicago Fed President Charles Evans said yesterday the U.S. central bank should not begin reducing the pace of its $85 billion of monthly asset purchases as the data used to gauge the economy’s health stopped during the government shutdown.
“The very earliest you’d be looking at Fed tapering is March,” said Besa Deda, the chief economist at St. George Bank Ltd. in Sydney. “There’s been a recovery in risk appetite and that’s seen flows into riskier assets and away from the U.S. dollar.”
Richmond Fed President Jeffrey Lacker is scheduled to speak today, as is his New York counterpart William Dudley.
The dollar slid 3.7 percent in the past three months, the worst performer in a basket of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro rose 1 percent, while the yen declined 1.1 percent.
Home Sales
Sales of previously owned homes in the U.S. decreased 3.3 percent last month, according to the median estimate in a Bloomberg News survey of economists before an Oct. 21 report by the National Association of Realtors. If confirmed, that would be the biggest monthly drop since June 2012.
The Australian dollar was set for a weekly gain after China’s National Bureau of Statistics said gross domestic product rose 7.8 percent in the three months through September from a year earlier, after climbing 7.5 percent in the previous period.
The Aussie was little changed at 96.40 U.S. cents, set for a 1.8 percent gain this week, the biggest increase since the period ended Sept. 6.
“China’s economic growth is strong and that translates into further yuan appreciation pressure,” said Daniel Chan, director at China Silver Global Investment Consultant Ltd. in Hong Kong. “There are also concerns over U.S. growth and tapering could be delayed, which will bolster demand for non-dollar assets.”
The yuan was little changed at 6.0946 per dollar after reaching 6.0915, the strongest level since the government unified the official and market exchange rates at the end of 1993. The currency has gained 0.4 percent this week, the most since the five days ended Sept. 14, 2012.
To contact the reporters on this story: Emma Charlton in London at echarlton1@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
