Tags: dollar | yen | kiwi | foreign exchange

Dollar in Longest Rally Since August Versus Yen; Kiwi Slides

Thursday, 23 October 2014 02:08 PM

The dollar extended its rally versus the yen to six days, the longest since August, as a report showing the fewest initial jobless claims in 14 years countered bets the U.S. economy will suffer from sluggish global growth.

The Bloomberg Dollar Spot Index gained for a third day as the Federal Reserve Bank of Chicago’s national index of economic activity rose more than forecast, after a report yesterday showed an unexpected advance in consumer prices. The euro climbed versus Japan’s currency on a report showing manufacturing in the 18-nation bloc expanded. New Zealand’s dollar fell after inflation slowed. Norway’s krone advanced.

“The dollar’s certainly recovering,” said Robert Lynch, a currency strategist at HSBC Holdings Plc in New York. European factory data “may be working to undo some of those concerns about Germany, by extension about Europe, and there may be a less risk-off, and concern about global growth, environment.”

The dollar climbed 1.1 percent to 108.27 yen as of 1:31 p.m. New York time. The rally, which has boosted the dollar 2.2 percent, is the longest since a seven-day streak ended Aug. 26. The euro was little changed at $1.2643. The shared currency advanced 1 percent to 136.90 yen after adding 1.1 percent, the biggest gain since March 6.

The Bloomberg Dollar Spot Index, which tracks the currency against 10 other currencies, added 0.3 percent to 1,070.30, pushing its advance this year to 5 percent, the most since 2008.

Kiwi, Krone

New Zealand’s currency fell the most of the U.S. dollar’s 31 major peers as the South Pacific nation’s annual inflation rate fell to 1 percent in the third quarter from 1.6 percent in the previous three months, prompting speculation policy makers will delay raising borrowing costs. The kiwi slid 1.4 percent to 78.18 U.S. cents, the biggest tumble since Oct. 3.

The krone led gains versus the greenback after the Norges Bank kept its benchmark rate unchanged at 1.5 percent, in line with analyst estimates. The currency rose 0.5 percent to 6.5789 per dollar and 0.5 percent to 8.3180 per euro.

Turkey’s lira added 0.5 percent, the most among 24 emerging-market currencies versus the dollar, after its central bank held rates. Russia’s ruble dropped 0.9 percent, pushing its year-to-date loss to 23 percent.

Euro, Yen

The euro climbed versus the yen as reports showed the euro- area economy may have moved one step away from another contraction.

A purchasing managers’ index for the manufacturing industry rose to 50.7 in October from 50.3 a month earlier, London-based Markit Economics said. Analysts surveyed by Bloomberg News predicted a drop to 49.9. A reading below 50 indicates contraction. A measure for services held at 52.4.

Bundesbank President Jens Weidmann, a member of the European Central Bank’s governing council, said in an interview with a Latvian magazine that there is consensus at the ECB that the risk of a problematic deflation is low.

“With investors already positioned for weaker EU data, the better PMI helped the euro come off the 1.2600 area and move back above 1.2650,” Brown Brothers Harriman & Co. analysts led by Marc Chandler wrote in a client note today. “Hawkish comments by Bundesbank President Weidmann may have helped too.”

Bank of Japan Governor Haruhiko Kuroda said this month a weaker yen in line with the fundamentals of the economy is positive. He also said the BOJ will increase its unprecedented stimulus program if needed.

Japan sold three-month bills today at minus 0.0037 percent, with a government-debt sale drawing a negative yield for the first time.

Divergent Policy

The dollar rally is being driven by expectations the Fed is preparing to raise interest rates while policy makers in Japan and Europe will maintain or increase bond-buying programs to pump money into their economies. Futures contracts indicate the U.S. central bank will boost its benchmark rate by January 2016.

“In the picture of modest dollar strength into year-end, I still see dollar-yen moving higher,” said Simon Smith, chief economist at FXPro Group Ltd. in London.

The dollar rose as the four-week average of jobless claims dropped to 281,000, the lowest since May 2000, from 284,000 the week before, a Labor Department report showed today in Washington. The reading for the week ended Oct. 18 climbed by 17,000 to 283,000, in line with the median forecast of 52 economists surveyed by Bloomberg.

The Chicago Fed’s national index was at 0.47 in September, versus an estimate of 0.15 and an August reading that was revised down to minus 0.25 from minus 0.21. The consumer price index climbed 0.1 percent after decreasing 0.2 percent in August, a Labor Department report showed yesterday.

“What we’re looking for is further consolidation in dollar strength,” said Mark McCormick, a foreign-exchange strategist in New York at Credit Agricole SA. “The Fed’s comfortable with the strength of the labor market. But I think the real issue is really where the slack in the labor market is.”

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The dollar extended its rally versus the yen to six days, the longest since August, as a report showing the fewest initial jobless claims in 14 years countered bets the U.S. economy will suffer from sluggish global growth.
dollar, yen, kiwi, foreign exchange
Thursday, 23 October 2014 02:08 PM
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