BLBG: Dollar Halts Two-Day Drop Before Fed Minutes; Lira Falls
The dollar halted a two-day drop versus the euro before the Federal Reserve releases minutes of its most recent meeting as investors weighed the timing of the first interest-rate increase since 2006.
A gauge of the U.S. currency advanced for the first time this week. Russia’s ruble declined as data showed the central bank sold $420 million of foreign currency in its third day of interventions this month. Turkey’s lira weakened as the region’s Kurds protested the government’s limited response to Islamic State militants. Australia’s dollar fell after the statistics bureau said it will drop the widely watched seasonally adjusted employment figure.
“The minutes are very much in focus,” said Michael Sneyd, a foreign-exchange strategist at BNP Paribas SA in London. “If we hadn’t had the selloff in the dollar in past few days we’d be a bit cautious but because we had that selloff they could provide a bit of a catalyst. Risk-reward favors being long dollar going into the minutes,” Sneyd said, referring to bets on a stronger U.S. currency.
The greenback rose 0.1 percent to $1.2652 per euro as of 7:43 a.m. New York time after sliding 1.2 percent in the previous two sessions. It appreciated to $1.2501 on Oct. 3, the strongest level since August 2012. The dollar strengthened 0.2 percent to 108.28 yen. The Japanese currency weakened 0.1 percent to 136.99 yen per euro.
Bond Purchases
The Fed, which next meets on Oct. 28-29, is on track to end a program of stimulatory bond purchases this month. Futures trading showed about a 67 percent likelihood that the central bank will increase borrowing costs to 0.5 percent or higher next September.
Forecasts for the Fed to raise interest rates in mid-2015 are “reasonable” as policy makers wait for unemployment to fall further and inflation to rise, New York Fed President William C. Dudley said yesterday.
The target rate has been maintained in a range of zero to 0.25 percent since December 2008 to support the economy.
“If the Fed minutes today show discussions about specific timing of their interest-rate increase, that would boost the likelihood that the next policy statement will alter the wording around keeping borrowing costs low for an extended period,” said Junichi Ishikawa, an analyst at IG Markets in Tokyo. “That will spur dollar buying.”
Russia’s currency slid as data showed the nation’s monetary authority spent funds on Oct. 6 to shore up the ruble. The bank also said it shifted the upper boundary of the currency’s trading band by 5 kopeks yesterday.
Russian Intervention
President Vladimir Putin is under pressure as the U.S. and European Union impose sanctions on the economy and investors pull money out of the country. Bank of Russia will probably need to spend as much as $30 billion by year-end to slow the decline in the currency, which lost 14 percent against the dollar last quarter, according to UralSib Capital.
The ruble dropped for the ninth time in 10 days against a euro-dollar basket, sliding 0.1 percent to 44.7632.
The lira fell as demonstrators fought with police and, in some areas, with members of local Islamist groups, according to Turkish media. The outpouring of anger came as Syrian Kurdish fighters failed to stop Islamic State advancing through the outskirts of Kobani, a mainly Kurdish town that militants besieged three weeks ago.
The lira weakened for a second day, dropping 0.7 percent to 2.2900 versus the dollar.
Australian Jobs
Australia’s statistics bureau said seasonally adjusted jobs estimates will be revised so they are the same as the original series for July, August and for the September data due tomorrow. The bureau came under scrutiny after unemployment jumped from 6.1 percent to a 12-year high of 6.4 percent in July, then retraced the gain in August, when a record 121,000 jobs were added under the seasonally adjusted measure.
The Aussie dropped 0.4 percent to 87.82 U.S. cents.
South Korea’s won dropped to a six-month low after the International Monetary Fund cut the nation’s 2015 global growth forecast to 3.8 percent yesterday from its July estimate of 4 percent.
The currency declined 0.8 percent to close in Seoul at 1,074.15 per dollar after touching 1,074.75, the weakest level since March 27.
To contact the reporters on this story: David Goodman in London at dgoodman28@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net
To contact the editors responsible for this story: Dave Liedtka at dliedtka@bloomberg.net Keith Jenkins
