Dollar, Yen Slide as Investors Seek Higher Risk

Monday, 01 November 2010 08:09 AM

The dollar and yen declined against most of their major counterparts after a Chinese report showed manufacturing accelerated in October, encouraging demand for higher-yielding assets.

The Swiss franc slumped to its weakest level since August against the euro as global stocks gained. The U.S. and Japanese currencies also slid on speculation the Federal Reserve and Bank of Japan will announce further measures this week to keep borrowing costs low. Norway’s krone climbed against the dollar after manufacturing climbed for a second month.

“Markets are beginning to look at the global picture as a glass half-full rather than half-empty,” said Ray Farris, London-based head of foreign-exchange strategy at Credit Suisse Group AG. “That pickup in growth is about to come with a significant new monetary ease from the Fed, so that’s bearish for the dollar.”

The dollar traded at $1.3938 per euro at 8 a.m. in New York, compared with $1.3947 on Oct. 29, after touching $1.4011, the weakest level since Oct. 25. The yen slid 0.1 percent to 112.22 per euro, from 112.12, after gaining 1.3 percent last week. The yen was at 80.37 per dollar, compared with 80.40, after touching 80.22, the strongest level since April 1995.

The MSCI World Index climbed 0.2 percent after China’s purchasing managers’ index rose to 54.7 last month from 53.8 in September. Another gauge of China’s manufacturing from HSBC Holdings Plc and Markit Economics jumped to 54.8 from 52.9. Futures on the Standard & Poor’s 500 Index advanced 0.6 percent.

Fed Meeting

Fed policy makers are expected at the end of their Nov. 2-3 meeting to announce another round of government bond purchases. Estimates for the ultimate size of the Fed’s asset-buying program include $1 trillion by Bank of America-Merrill Lynch and $2 trillion by Goldman Sachs Group Inc. Purchases of $500 billion would add as much stimulus as reducing the Fed’s benchmark rate by 0.50 to 0.75 percentage point, New York Fed President William Dudley said in an Oct. 1 speech.

The yen declined 0.5 percent to 79.48 versus the Australian dollar and slid 0.2 percent to 11.52 against the South African rand as traders awaited the outcome of the Bank of Japan’s Nov. 4-5 meeting, which was originally scheduled for Nov. 15-16.

The BOJ’s “timing has more to do with the effects on the market if the Federal Reserve decides to do a certain amount of QE that is judged to be quite aggressive,” Thio Chin Loo, a senior currency strategist in Singapore at BNP Paribas SA, said in a Bloomberg Television interview. “If the dollar does fall back on this aggressive QE, then the BOJ may want to step into the markets to stabilize the dollar-yen rate.”

Yen’s Gain

Japan’s currency has appreciated more than 5 percent since authorities acknowledged on Sept. 15 intervening for the first time in six years to help the nation’s export-dependent economy by selling the yen.

The Fed will release its policy decision on Nov. 3 at about 2:15 p.m. in Washington. About 18 hours later, at noon in London (8 a.m. in New York and Washington), the Bank of England will announce its move. The ECB will go public with its decision 45 minutes later, at 1:45 p.m. in Frankfurt (8:45 a.m. in New York). The Bank of Japan concludes its talks on Nov. 5 at about noon local time (11 p.m. in New York).

The Dollar Index, which IntercontinentalExchange Inc. uses to track the dollar against the currencies of six major U.S. trading partners including the euro and yen, fell 0.3 percent to 77 after touching 76.773, the lowest level since Oct. 25.

Weaker Dollar

The gauge of the greenback has dropped 4.3 percent since Sept. 21, when the Fed said in a statement following its policy meeting that it’s prepared “to provide additional accommodation if needed” to support the economic recovery.

The yen tumbled more than 1 percent against the dollar in less than two minutes in Tokyo trading before retracing much of the drop. A Japanese government official declined to comment on the yen’s movements when speaking to reporters in Tokyo on the condition of anonymity.

The reversal of the moves signaled that it resulted either from a mistake by a trader or a system error, Kathleen Brooks, research director in London at Forex.com, a unit of the online currency trading firm Gain Capital, wrote in a client note.

The Swiss franc tumbled as much as 0.7 percent to 1.3797 per euro, the weakest level since Aug. 11, and slid as much as 0.7 percent to 98.91 centimes versus the dollar.

The krone climbed for a third day against the dollar, appreciating by 0.2 percent to 5.8397.

Norwegian Manufacturing

A seasonally adjusted index based on responses from Norwegian purchasing managers rose to 54.2 from a revised 53.1 in September, Fokus Bank said in a statement today. A reading above 50 signals expansion. Norges Bank last week kept its main interest rate unchanged at 2 percent.

Traders are losing confidence in the Group of 20 finance officials’ pledge to avoid foreign-exchange manipulation about a week after the leaders vowed to stop devaluing currencies to prop up their economies.

Volatility among Group of Seven currencies rose to about the highest level in four months since the G-20 meeting ended on Oct. 23, according to the JPMorgan G-7 Volatility Index. Euro- dollar fluctuations jumped 30 percent since Sept. 20, a day before the last Fed policy meeting.

--With assistance from Matthew Brown in London. Editors: Dennis Fitzgerald, Mark McCord

To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Ron Harui in Singapore at rharui@bloomber.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.ney

© Copyright 2018 Bloomberg News. All rights reserved.

1Like our page
The dollar and yen declined against most of their major counterparts after a Chinese report showed manufacturing accelerated in October, encouraging demand for higher-yielding assets.The Swiss franc slumped to its weakest level since August against the euro as global stocks...
Monday, 01 November 2010 08:09 AM
Newsmax Media, Inc.

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

© Newsmax Media, Inc.
All Rights Reserved