Currencies

[Muthukali]

New Zealand’s Dollar Advances on Food, House Price Data; Aussie Rallies

The New Zealand dollar rose against all of its 16 major counterparts after reports showed the nation’s house and food prices increased in February.

The so-called kiwi and Aussie dollars snapped declines against the yen from yesterday as Asian shares rallied after U.S. stocks erased losses, supporting demand for riskier assets. The appeal of Australia’s currency was limited after home loans in the nation fell more than economists estimated and business confidence slumped to a five-month low.

“We had some housing data and food price data that was a little bit stronger than you would have expected,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp. (WBC), Australia’s second-largest lender. “The U.S. equity market has recovered and the Aussie has gone up, so the kiwi has gone up as well.”

New Zealand’s dollar strengthened 0.4 percent to 82.14 U.S. cents as of 12:25 p.m. in Sydney. The kiwi jumped 0.6 percent to 67.67 yen from yesterday, when it declined 0.7 percent. Australia’s dollar rose 0.2 percent to $1.0537 from yesterday, when it touched $1.0474, the lowest since Jan. 25. The Aussie advanced 0.4 percent to 86.81 yen, recouping some of yesterday’s 0.8 percent slide.

Australia’s government bonds declined, pushing the yield on the 10-year security up two basis points to 3.94 percent.

The MSCI Asia Pacific Index (MXAP) of stocks climbed 0.8 percent, rebounding from a 0.6 percent fall yesterday. Standard & Poor’s 500 Index futures rose 0.2 percent from yesterday, when the gauge fell as much as 0.3 percent.

New Zealand Economy
The Real Estate Institute of New Zealand Inc.’s index of house prices increased 0.8 percent to 3,280.5 last month, according to an e-mailed statement released today. The number of transactions rose 37 percent from a year earlier, the institute said.

New Zealand’s February food prices climbed 0.6 percent from the previous month, the statistics bureau said today. The country’s two-year swap rate, a fixed payment made to receive floating rates, increased one basis point, or 0.01 percentage point, to 3.03 percent.

The number of loans granted to build or buy houses and apartments in Australia fell 1.2 percent in January from the previous month, the statistics bureau said in Sydney today. That compared with a revised 2.1 percent increase in December and the 0.6 percent decline that was the median forecast of economists surveyed by Bloomberg.

Australia’s business confidence index fell last month to 1, the lowest level since September, from 4 in January, a National Australia Bank Ltd. survey of more than 500 companies taken Feb. 20-24 and released in Sydney today showed.

 

[Muthukali]

Yen Falls Against Most Peers Before Bank of Japan Concludes Policy Meeting

The yen fell versus most of its major peers before the Bank of Japan ends a two-day meeting to discuss interest rates and the size of an asset-purchase fund.

The dollar traded 0.5 percent from a 10-month high against the yen as evidence of a U.S. economic recovery tempered speculation that the Federal Reserve will signal additional easing at a meeting today. The euro advanced versus the U.S. currency after euro-area finance ministers approved a second Greek bailout, clearing the way for the first payment from the 130 billion-euro package ($171 billion) to be made this month.

“We need to watch whether they will signal any further asset purchases,” which would weaken the yen, said Imre Speizer, a strategist in Auckland at Westpac Banking Corp. (WBC), Australia’s second-largest lender, referring to the Bank of Japan’s policy meeting. The BOJ “needs to ease further.”

The yen traded at 82.22 per dollar at 11:29 a.m. in Tokyo from 82.23 yesterday, after touching 82.65 on March 9, the weakest since April 27. Japan’s currency dropped 0.2 percent to 108.37 per euro. The euro gained 0.2 percent to $1.3180.

Twelve of 14 economists surveyed by Bloomberg News expect the BOJ to leave its asset-purchase program unchanged and keep the benchmark interest rate at a range of zero to 0.1 percent. The bank unexpectedly boosted bond buying by 10 trillion yen ($121 billion) Feb. 14. The yen has weakened 5.8 percent against the dollar since the day before the decision.

The Bank of Japan (8301) may expand monetary stimulus today to show a commitment to ending deflation, according to Hiromichi Shirakawa, chief Japan economist at Credit Suisse AG and the only analyst who predicted last month’s easing.

U.S. Recovery Signs
The yen has declined 8.5 percent in the past three months, the worst performer among the 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar fell 3 percent, and the euro slid 1.8 percent.

Retail sales in the U.S. increased 1.1 percent in February, the most in five months, according to the median estimate of economists in a Bloomberg News survey before Commerce Department figures due today. That would follow data on March 9 that showed nonfarm payrolls increased by 227,000 in February after rising by a revised 284,000 the prior month. The unemployment rate held at a three-year low of 8.3 percent.

“Recent U.S. data may be strong enough to persuade policy makers to be less cautious about the pace of the recovery,” said Toshiya Yamauchi, a senior analyst in Tokyo at Ueda Harlow Ltd., which provides currency margin-trading services. “The market is reducing bets for another round of quantitative easing, pushing the dollar higher.”

Greek Bailout
The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, reached 80.132 yesterday, the most since Jan. 25 and was at 79.829 today.

The index fell 0.4 percent on Jan. 25, when the Fed said subdued inflation and slack in the economy are likely to warrant keeping rates “exceptionally low” at least through late 2014.

The euro rallied from a three-week low touched yesterday versus the dollar after the currency bloc’s finance ministers approved Greece’s second bailout. Greece is now in line to receive more than 100 billion euros in the next three years from the European Financial Stability Facility, the euro region’s temporary rescue fund, starting with payments of 5.9 billion euros in March, 3.3 billion euros in April and 5.3 billion euros in May, EFSF Chief Executive Officer Klaus Regling said.

“The worst is over for the euro with Greece avoiding a disorderly default,” said Noriaki Murao, managing director in New York at the Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s biggest financial group by market value. “I expect to see traders unwinding their short positions.”

 

[Muthukali]

Dollar Gains as Fed Sees Improving Economic Data, Damping Stimulus Bets

The dollar gained against the euro and the yen as the Federal Reserve policy makers raised their assessment of the economy as the labor market gathers strength and refrained from more actions to lower borrowing costs.

The Federal Open Market Committee, which met today in Washington, kept the central bank’s benchmark interest rate target unchanged at zero to 0.25 percent, where it’s been since December 2008. “The unemployment rate has declined notably in recent months, but remains elevated,” the central bank said in a statement. The Fed has bought $2.3 trillion of bonds in two rounds of so-called quantitative easing from December 2008 until June 2011. The yen dropped earlier to the weakest level against the dollar in almost 11 months as the Bank of Japan plans to keep using monetary policy as a tool to tackle deflation.

“Most of what you’ve read in the statement was what it felt like the market was expecting, with acknowledgment of better data, but no change in policy,” said John Shin, senior G- 10 foreign exchange strategist at Bank of America Corp. in New York. “The FOMC didn’t do anything to tilt policy expectations in either direction.”

The dollar strengthened 0.5 percent to $1.3086 at 2:31 p.m. in New York. It rose 0.9 percent to 82.95 yen after reaching an almost 11-month high.

Bernanke’s Views
Sixty-one percent of respondents in a March 9-12 Bloomberg News survey of economists said Fed Chairman Ben S. Bernanke would refrain from any action to expand the Fed’s $2.89 trillion balance sheet this year. In January, 50 percent of those surveyed predicted more bond buying.

Bernanke’s comments in a congressional testimony earlier this month also damped speculation the Fed will introduce another round of asset purchases.

“We have seen some positive developments in the labor market,” Bernanke said in prepared testimony to the House Financial Services Committee in Washington. He said keeping monetary stimulus is warranted even as the unemployment rate falls.

Retail sales in the U.S. rose in February by the most in five months, reflecting broad-based gains that indicate the world’s largest economy is picking up even as gasoline costs climb. The 1.1 percent advance matched the median forecast of 81 economists surveyed by Bloomberg News and followed a 0.6 percent increase in January that was larger than previously estimated, Commerce Department figures showed today in Washington.

Economic Data
It followed data on March 9 that showed nonfarm payrolls increased by 227,000 in February, marking best six months of job gains since 2006, after rising by a revised 284,000 the prior month. The unemployment rate held at a three-year low of 8.3 percent.

Central-bank officials at their Jan. 25 meeting kept open the option of a third round of bond purchases in case the economy weakens or inflation falls too low. The Dollar Index fell 0.4 percent after the Fed’s last meeting, when Bernanke said that policy makers were considering additional asset purchases to boost growth.

The yen weakened earlier after Bank of Japan Governor Masaaki Shirakawa indicated the central bank will keep using monetary policy as a tool to tackle deflation.

Shirakawa and his board members kept the benchmark interest rate between zero and 0.1 percent, the central bank said in a statement today. Policy makers left the bank’s asset-purchase fund at 30 trillion yen ($360 billion) after unexpectedly boosting bond buying by 10 trillion yen at the Feb. 14 meeting. The measures contributed to weakening the yen and helped boost stocks, Shirakawa told reporters in Tokyo.

The dollar may strengthen to 85 yen by the middle of this year as the greenback’s 100-day moving average rose above its 200-day moving average, forming a so-called golden cross, said Koji Fukaya, Credit Suisse’s chief currency strategist in Tokyo.

Implied volatility of three-month options on the dollar-yen currency pair declined to 10.86 percent, according to data compiled by Bloomberg. It advanced to 11.21 percent yesterday, the most since Sept. 30. The implied volatility of Group of Seven currencies fell to 10.25 percent from 10.38 percent yesterday, according to the JPMorgan G7 Volatility Index.

 

[Muthukali]

Dollar Touches 11-Month High Against Yen on U.S. Recovery

The dollar rose to an 11-month high against the yen before U.S. data today forecast to show regional manufacturing expanded and initial jobless claims decreased, adding to signs the American economy is gathering momentum.

The greenback was near the highest level in four weeks against the euro amid reduced bets the Federal Reserve will begin a third round of bond purchases, or quantitative easing, which could debase the world’s reserve currency. The yen declined against most its major counterparts as Asian stocks advanced for a third day, curbing demand for the lower-yielding Japanese currency.

“We’re seeing a shift in trend to dollar buying across the board,” said Junichi Ishikawa, an analyst in Tokyo at IG Markets Securities Ltd. “Should U.S. economic data continue to come in firm, it will support the market’s view that the Fed doesn’t need QE3.”

The dollar touched 84.15 yen, the highest level since April 13, before trading at 84.13 yen at 10:19 a.m. in Tokyo, 0.5 percent above yesterday’s close in New York. The U.S. currency rose 0.2 percent to $1.3007 per euro. It earlier climbed as high as $1.3037, the strongest since Feb. 16. The yen dropped 0.3 percent to 109.41 per euro, after earlier touching 109.45, the weakest since Feb. 27.

The MSCI Asia Pacific Index of shares gained 0.1 percent today, after the gauge rose 0.9 percent over the previous two days.

U.S. Manufacturing
The Federal Reserve Bank of New York’s general economic index probably slid to 17.5 this month from 19.5 in February, according to the median estimate of economists in a Bloomberg News survey. Readings greater than zero signal expansion in the so-called Empire State Index, which covers New York, northern New Jersey and southern Connecticut. A gauge of manufacturing in the Philadelphia region increased to 12 in March, the highest since April, another poll indicates. Both Fed reports are due today.

The Labor Department may say today the number of initial applications by Americans for jobless benefits fell by 5,000 to 357,000 in the week ended March 10, according to economists surveyed by Bloomberg.

The Federal Open Market Committee said March 13 it expects “moderate economic growth” and predicted the U.S. unemployment rate “will decline gradually.”

 

[Muthukali]

Aussie, Kiwi Dollars Are Set for Weekly Gain Versus Yen

The Australian and New Zealand dollars were set for weekly gains versus the yen as investors sought higher-yielding assets with the Bank of Japan (8301) pledging to do its utmost to protect the economy.

Both South Pacific nations’ currencies have risen more than 5 percent against the yen since the BOJ’s Feb. 14 meeting, when it expanded a program to buy assets as Japan posted a record trade deficit in January. The so-called Aussie and kiwi were poised to decline against the greenback this week before a U.S. report forecast to show industrial output rose last month.

“The Japanese trade data has been so poor that people are buying U.S. dollars and selling yen,” said Tim Kelleher, head of institutional currency sales in Auckland at ASB Institutional, a unit of Commonwealth Bank of Australia. (CBA) “A rise in dollar-yen will add to the kiwi and Aussie being supported on dips against the yen.”

Australia’s dollar traded at 87.88 yen as of 11:46 a.m. in Sydney from 87.96 in New York yesterday, set for a 0.8 percent advance this week. It fetched $1.0521 from $1.0525. New Zealand’s currency bought 68.48 yen from 68.45 yesterday and 67.74 on March 9. The kiwi was at 81.98 U.S. cents from 81.91 yesterday.

BOJ Easing
Benchmark interest rates are 4.25 percent in Australia (RBACTR) and 2.5 percent in New Zealand, compared with as low as zero in Japan. BOJ Governor Masaaki Shirakawa’s board last month unexpectedly added 10 trillion yen ($120 billion) to an asset- purchase program and set a 1 percent inflation goal after an economic slide fueled criticism it has been slower to act than counterparts.

Most BOJ members said the expansion in the easing program was appropriate, minutes released today showed. One board member indicated that aiming for inflation of 2 percent in the long- term would avoid one-sided yen moves, they also showed.

The dollar has strengthened against the Australian and New Zealand currencies this week as signs the world’s largest economy is gaining momentum lowered expectations that the Federal Reserve will add to monetary easing.

Industrial output at U.S. factories, mines and utilities climbed 0.4 percent in February, according to the median estimate of economists surveyed by Bloomberg News before today’s data are released.

The Australian dollar has weakened 0.2 percent this week, the third-biggest loser among 10 developed nation currencies tracked by Bloomberg Correlation Weighted Indexes. The New Zealand dollar advanced 0.2 percent, the yen slid 0.9 percent and the U.S. dollar climbed 0.4 percent.

 

[Muthukali]

Traders Bet Fed Rate to Rise Year Before Late-2014 Pledge

Money-market derivative traders expect the U.S. central bank will lift its target rate for overnight loans a year earlier than Federal Reserve Chairman Ben S. Bernanke’s pledge of late 2014.

Treasury yields surged and money-market rates rose after Federal Open Market Committee members raised their assessment of the U.S. economy on March 13. The policy statement drove money- market derivative traders to bring forward the time when they predict the Fed will first lift its target of zero to 0.25 percent and damped speculation the Fed will buy more debt in a third round of quantitative easing, or QE3.

Forward markets for overnight index swaps, whose rate shows what traders expect the federal funds effective rate to average over the life of the contract, signal a quarter-percentage advance in approximately the September and October 2013 period, according to data compiled by Bloomberg as of March 15. Last month, such an increase in the effective rate wasn’t predicted until early 2014. This year the effective rate has averaged 0.15 percentage point below the top end of the target range that the Fed reiterated three days ago.

“In a week, the market has moved from focusing on how and when the Fed might do QE3 to when the Fed might start the tightening cycle,” said Brian Smedley, a strategist in New York at Bank of America Corp., in a telephone interview. “Not only has the market priced out QE3, but rates are pricing in Fed hikes a full year ahead of when the FOMC anticipates raising rates. In our view, it’s very hard to conceive of a scenario where the Bernanke Fed is raising rates in 2013.”

Economic Rebound
Data signaling the economic rebound is gaining steam emboldened traders to sell Treasuries and lift money-market rates amid positive sentiment from the central bank.

Retail sales jumped 1.1 percent in February, according to a U.S. Commerce Department report March 13. The Labor Department reported yesterday that initial jobless claims in the U.S. decreased in the week ended March 10 to 351,000, matching the lowest level in four years.

Yields on 10-year Treasury notes touched 2.35 percent today, the highest level in more than four months, while those on 30-year bonds rose to as high as 3.49 percent. The two-year note yield was 0.36 percent, up from 0.32 percent at the end of last week.

Move ‘Overdone’
“In the past few weeks, the market had been thinking the forward-rate structure it had priced in was too flat and had rates generally too low,” said Jim Lee, head of short-term markets and futures and options strategy in Stamford, Connecticut, at Royal Bank of Scotland Group Plc’s RBS Securities Inc. “There are still people thinking that this move is just beginning. However, it appears to me that it may be overdone,” said Lee, speaking in a phone interview.

The overnight index swap market is now pricing in cumulative Fed rate increases of 1.71 percentage points through the last quarter of 2015, up from a total of 1.27 percentage points a month ago, according to Lee’s calculations.

Overnight index swap rates, or OIS, are over-the-counter derivatives in which one party agrees to pay a fixed rate in exchange for the average of a floating central-bank rate over the life of the swap. For U.S. dollar OIS, the floating rate is the daily effective federal funds rate, which was 0.14 percent on yesterday.

Fed’s Lacker
Federal Reserve Bank of Richmond President Jeffrey Lacker said today the U.S. central bank would likely need to raise interest rates next year.

“My current assessment is that an increase in interest rates is likely to be necessary some time in 2013,” Lacker said in a statement on the Richmond Fed’s website. He explained why he cast the sole dissenting vote on the FOMC’s March 13 statement that economic conditions are likely to warrant “exceptionally low” levels of the federal funds rate at least through late-2014.

“The economy is expanding at a moderate pace, and inflation is close to the committee’s 2 percent objective,” Lacker said. “As the expansion continues, the federal funds rate will need to rise in order to prevent the emergence of inflationary pressures.”

Forward OIS Rates
The forward OIS rates as well as implied yields on federal funds and Eurodollar futures contracts, which are used to gauge where traders speculate on the path of the Fed’s target rate, all rose this week. Both futures contracts trade on the CME Group exchange in Chicago in terms of price for an implied yield. Eurodollars are based on prediction for the three-month dollar London interbank offered rate, while fed funds contracts are bets on the Fed effective rate.

Fed funds futures, which were first offered on the Chicago Board of Trade in October 1988, indicate that traders bet the effective rate will average 0.44 percent during the month of November 2013. That’s up from an implied rate of 0.29 percent at the start of this month. The effective rate averaged 0.11 percent over the past month.

“This week has really been about people getting shaken out of their complacency and having to exit some trades that were based on nothing happening with Fed rates,” said Alexander Manzara, a Chicago-based futures broker at TJM Institutional Services, in a phone interview. “It’s not that the market has come to an idea that the Fed may move to raise rates sometime quickly. It’s about disappointment with the idea that QE3 is not imminent and that the U.S. data has been a little bit better.”

 

[Muthukali]

Dollar Weakens as Inflation Data Back Fed Stance

The dollar weakened against most of its major peers after U.S. inflation data fueled speculation Federal Reserve policy makers will maintain economic stimulus.

The U.S. currency fell against the 17-nation euro as a gauge of consumer prices excluding food and energy rose less than forecast. Norway’s krone advanced with crude oil even as the central bank warned this week the currency may weaken. The yen headed for its sixth weekly drop against the dollar. The pound rallied as 10-year gilts yields were poised for the biggest weekly advance in more than three years.

“We’re seeing a correction in the dollar today as yields wilt a little bit on disappointing CPI data and little bit weaker consumer confidence,” said Boris Schlossberg, director of research at online currency trader GFT Forex in New York. “The krone is becoming the ultimate oil-growth play and they are concerned about the unnatural strength.”

The dollar fell 0.7 percent to $1.3175 per euro at 5 p.m. New York time, losing 0.4 percent this week. The U.S. currency declined 0.2 percent to 83.43 yen, paring a 1.2 percent weekly increase.

Yen Tumble
The yen has dropped 5.6 percent in the past month, the worst performer among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. Australia’s dollar has fallen 1.3 percent in that time, the second-worst performance.

Norway’s krone rose 0.9 percent to 5.7296 per dollar even as central bank Governor Oeystein Olsen said investors should be aware that the krone may weaken and that it’s a riskier investment than the Swiss franc.

“At some point there is a risk for investors that the krone weakens,” Olsen said in an interview in Oslo today. “We still have some room for maneuver in the interest-rate policy in both directions,” he said. “We have no certain level of the krone that we steer toward.”

Olsen sent the krone down to a five-week low against the euro this week when he cut the bank’s benchmark deposit rate to target the currency. The bank has stepped up its efforts to contain the commodity-backed krone’s ascent after it touched a nine-year high this month.

Golden Cross
Australia’s dollar may rise to 90 yen in one month after the 20-day moving average rose above the 200-day average, creating a golden-cross formation, said Gaitame.com Research Institute Ltd.

The currency rose 0.4 percent to 88.35 yen and advanced 0.6 percent to $1.0590.

The U.S. consumer-price index climbed 0.4 percent, matching the median forecast of economists surveyed by Bloomberg News, the Labor Department reported today in Washington. The core measure, which excludes more volatile food and energy costs, climbed 0.1 percent, less than projected.

“This confirms the Fed’s view that inflation remains subdued and may alter investor’s perceptions about the possibility of further accommodation from the Fed in the next few months,” said Andrew Cox, a currency strategist at Citigroup Inc. in New York. “The month-over-month CPI print was enough of a miss to shake out some of the short-term dollar longs in the market.” A long position is a bet that an asset will increase in value.

Dollar Measure
The Dollar Index (DXY), which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, fell 0.5 percent to 79.778.

Futures traders decreased their long dollar positions in the week ended March 13. The difference in the number of wagers by hedge funds and other large speculators on an appreciation in the dollar compared with those on a drop -- so-called net longs -- was 12,770, compared with net longs of 21,521 a week earlier. The gauge measures the dollar against the yen, euro, Swiss franc, pound, Mexican peso and the Australian, Canadian and New Zealand dollars.

The Fed left unchanged March 13 its statement that economic conditions would probably warrant “exceptionally low” interest rates at least through late 2014. It has held its target rate to a range of zero to 0.25 percent since December 2008.

Inflation “has been subdued in recent months although prices of crude oil and gasoline have increased lately,” the Fed said. The increase in oil will “push up inflation temporarily, but the committee anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate.”

Economic Data
U.S. industrial production was little changed last month, compared to a predicted 0.4 percent expansion, the Federal Reserve reported today, and consumer confidence decreased in March. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment fell to 74.3 in March from 75.3 the prior month. The gauge was projected to rise to 76.

JPMorgan Chase & Co. raised its forecast for the dollar against the euro and the yen this year. The euro will drop to $1.36 from $1.38. Against the Japanese currency, the dollar will strengthen to as high as 86 by mid-June before ending the year at 83.

Sterling rose against all its major counterparts as 10-year gilt yields headed for the biggest weekly gain since January 2009, increasing the appeal of pound-denominated assets.

The currency gained 0.9 percent to $1.5844 and 0.1 percent to 83.16 pence per euro as the benchmark 10-year gilt yields headed for a 29 basis point advance, or 0.29 percentage point, on the week.

The yield premium that investors receive in gilts versus similar maturity U.S. debt widened to 15 basis points from nine basis points yesterday.

Sterling was also supported against the 17-nation euro amid speculation the European Central Bank may not take further action to fight Europe’s debt turmoil as inflation nears its 2 percent limit even as the economy contracts.

“We’ve done a lot,” European Central Bank Governing Council member Erkki Liikanen said in a Bloomberg News interview in Helsinki yesterday, citing the central bank’s record-low interest rates and three-year loans. “We must also decide how and when we exit in a controlled and timely manner,” he said, declining to elaborate.

 

[GOD IS MY DOG]

aiyah.....................economic growth got nothing to do with rises in NZD or whatever.............


when Dow Jones go up..............USD and YEN go down......................so others go up.............


same with oil and gold.......................


it's all just a casino game...................controlled by the commercial banks and private central banks...............

 

[Muthukali]

aiyah.....................economic growth got nothing to do with rises in NZD or whatever.............


when Dow Jones go up..............USD and YEN go down......................so others go up.............


same with oil and gold.......................


it's all just a casino game...................controlled by the commercial banks and private central banks...............

Nowadays, inverse relationship is not in trend.

 

[Muthukali]

Asia Currencies Slide in Week as Fed Stance Boosts Dollar Demand

Asian currencies had a second weekly decline as an improving U.S. economy and the Federal Reserve’s decision not to embark on further monetary easing boosted demand for the dollar.

Malaysia’s ringgit led losses after the government reported factory production rose the least in six months in January following data last week showing the smallest increase in exports since 2010. The rupee posted its worst weekly losing streak for the year after policy makers left interest rates unchanged, citing inflation risks caused by higher oil prices.

“This week’s main trend was the dollar’s appreciation supported by signs of U.S. economic improvement,” said Minori Uchida, a senior analyst in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd. “Based on the series of data recently, the market also views the Fed may not keep low interest rates until 2014 as previously predicted.”

The ringgit fell 1.7 percent from a week ago to 3.0613 per dollar in Kuala Lumpur yesterday, after reaching a seven-week low on March 15, according to data compiled by Bloomberg. The Philippine peso declined 1.1 percent to 43.068, the rupee dropped 0.7 percent to 50.1912, and South Korea’s won lost 0.7 percent to 1,125.78.

Other reports from Asia this week signaled economic growth in the region is starting to slow. Thailand’s exports contracted for a third month in January, while China reported its worst trade deficit since at least 1989 for February. The Bloomberg- JPMorgan Asia Dollar Index (ADXY), which tracks the region’s 10 most- active currencies excluding the yen, fell 0.5 percent.

U.S. Data Stimulus
In contrast, U.S. data issued this week showed Americans applied for fewer jobless benefits, growth in retail sales accelerated and manufacturing gained momentum. The Dollar Index (DXY) traded on ICE Futures in New York, which tracks the currency against those of six major trading partners, rose for a third week and reached its highest level in almost two months.

China’s yuan fell for a third week after the government reported the smallest increase in consumer prices in 20 months on March 9. The central bank weakened its daily reference rate by 0.25 percent yesterday, the most in a week, to 6.3200 per dollar. The currency dropped 0.2 percent from March 9 to 6.3227 in Shanghai, according to the China Foreign Exchange Trade System.

“China’s policy makers are definitely increasing volatility,” said Craig Chan, the Singapore-based head of foreign exchange for Asia outside of Japan at Nomura Holdings Inc. “They want to eventually move to a more market-driven currency.”

Oil Pressure
The won traded near a one-month low after the Bank of Korea said on March 14 that the unemployment rate unexpectedly jumped to 3.7 percent in February, the highest in almost a year.

Indonesia’s rupiah dropped 0.4 percent to 9,156 per dollar and hit a two-month low of 9,218 on March 15. The currency completed a second weekly decline after overseas investors cut holdings of sovereign debt on concern government plans to raise energy prices will stoke inflation.

Global funds have trimmed bond ownership by 6.1 trillion rupiah ($665 million) since Feb. 22, when President Susilo Bambang Yudhoyono said fuel subsidies must be reduced.

“The biggest factor driving the rupiah is still the plan to raise fuel prices, which caused inflation expectations in Indonesia to rise significantly,” said Mika Martumpal, an analyst at PT Bank CIMB Niaga in Jakarta.

Elsewhere this week, Thailand’s baht fell 0.5 percent to 30.75 per dollar, while Taiwan’s dollar slipped 0.2 percent to NT$29.562 and Vietnam’s dong rose 0.1 percent to 20,820.

 

[Muthukali]

Euro Rises Versus Yen on Prospect of Euro Firewall Boost

The euro touched a 4 1/2-month high against the yen as German Chancellor Angela Merkel said European officials have discussed combining euro-area bailout funds to reinforce the region’s financial firewall.

Demand for the 17-nation euro was also supported before Italian Prime Minister Mario Monti holds talks with unions and employers to revise labor laws this week. The yen traded near an 11-month low versus the dollar as Asian stocks extended a four- day rally from last week, damping demand for haven assets. Federal Reserve Bank of New York President William C. Dudley speaks today at Melville, New York.

“There’s no doubt the market would very much like to see the two bailout funds combined,” said Sean Callow, a senior currency strategist in Sydney at Westpac Banking Corp. (WBC) “Anything that increases the firepower will be well received. It’s certainly one of the positives for the euro.”

The euro touched 110.15 yen, the highest since Oct. 31, before trading at 109.78 at 11:47 a.m. in Tokyo, 0.2 percent lower than 109.95 on March 16 in New York. The common currency bought $1.3165 from $1.3175 on March 16, when it rose 0.7 percent. The yen was little changed at 83.40 per dollar from 83.43. Japan’s currency on March 15 touched 84.18, the weakest since April 13.

European finance ministers have discussed “combination possibilities” for the permanent and the temporary rescue funds ahead of a March 30 meeting in Copenhagen, Merkel said March 16. Ministers may decide to increase the region’s crisis fund to a total capacity of 692 billion euros ($911 billion) when they meet, a euro-area official said separately.

The MSCI Asia Pacific Index (MXAP) of stocks rose 0.1 percent, after the MSCI World Index climbed 2.3 percent last week.

U.S. Economy
Demand for the dollar was limited after inflation data last week rekindled expectation of additional monetary stimulus after the Fed bought $2.3 trillion of Treasuries and mortgage-backed bonds in two rounds of purchases known as quantitative easing from December 2008 to June 2010. The U.S. consumer-price index excluding food and energy costs climbed 0.1 percent in February, the Labor Department reported on March 16 in Washington, half the pace projected by economists in a Bloomberg News survey.

The Fed left unchanged March 13 its assessment that economic conditions would probably warrant “exceptionally low” interest rates at least through late 2014. It has held its target rate to a range of zero to 0.25 percent since December 2008. Dudley, vice chairman of the policy-setting Federal Open Market Committee, will discuss the regional and national economies in his speech today.

QE3 Still Possible
“Dudley could come out and say QE3 is not off the table, and the economy will need to improve a great deal for them to rule out further easing,” said Westpac’s Callow, referring to the possibility of a third round of quantitative easing. “The U.S. dollar is likely to struggle.”

The yen declined 1.8 percent in the past week, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar lost 0.3 percent, while the euro slid 0.2 percent in the same period.

Bank of Japan (8301) Governor Masaaki Shirakawa on March 13 indicated that the central bank will keep using monetary policy as a tool to tackle deflation.

“The view that Japan has a stronger easing bias than the U.S. is still intact,” said Kengo Suzuki, a foreign-exchange strategist in Tokyo at Mizuho Securities Co., a unit of Japan’s third-largest bank by market value. “There’s still lingering downward pressure on the yen against the dollar on the back of the divergence of U.S. and Japanese central-bank policies.”

Futures traders increased bets the yen will decline against the dollar. The difference in the number of wagers by hedge funds and other large speculators on a decline in the yen compared with those on a gain -- so-called net shorts -- was 42,380 on March 13, compared with net shorts of 19,358 a week earlier, figures from the Washington-based Commodity Futures Trading Commission show.

 

[Muthukali]

Dollar Bulls Beat Bears in Futures for Longest Since 1999

Not since 1999 have currency traders been bullish on the dollar for so long, a sign that the market sees the U.S. resuming its role as the engine of global economic growth.

Futures anticipating a stronger dollar against its developed-market peers have outnumbered those predicting a drop for 26 consecutive weeks through the five days ended March 13, according to Commodity Futures Trading Commission data. That’s the longest streak since the start of a three-year rally in the world’s reserve currency 13 years ago.

While much of the 2.4 percent gain in the Dollar Index since 2009 has come from investors seeking safety from European debt turmoil and the global financial crisis, analysts now say expansion is trumping fear as a reason for buying U.S. assets. Growth in retail sales and jobs in the world’s biggest economy has damped expectations for more Federal Reserve stimulus that might debase the currency.

“The key message is that it’s not a flash-in-the-pan shift in sentiment, this seems to be something more structural,” Gareth Berry, a foreign-exchange strategist at UBS AG in Singapore said in a March 13 telephone interview. “The psychology around the dollar does appear to be changing and I’m confident that dollar strength will probably continue.”

Expectations for U.S. growth have diverged from the Group of 10 nations since December. America’s gross domestic product will expand 2.2 percent this year, according to the median forecast of 91 economists in a Bloomberg News survey, while developed nations increase 1.2 percent. The G-10 prediction is down from 2.5 percent in July, while the U.S. figure has stabilized near 2 percent.

Dollar Index
“There’s substantial scope going forward for the dollar to recover a lot more,” Derek Halpenny, European head of currency research at Bank of Tokyo-Mitsubishi UFJ Ltd., said in a March 14 interview on Bloomberg Television’s “Surveillance Midday” with Tom Keene. “One of the stories is this very, very significant dichotomy between the fundamentals in the U.S. and the fundamentals in Europe.”

IntercontinentalExchange Inc.’s Dollar Index, which tracks the greenback against the currencies of six major U.S. trade partners, fell 0.3 percent to 79.786 last week.

After the Australian dollar and the British pound, the U.S. currency is up the most in the past six months against its nine developed-nation counterparts, according to data compiled by Bloomberg. It has gained 1.5 percent, compared with the yen’s 9.3 percent drop and the euro’s 2.4 percent decline.

Increased Forecasts
The dollar traded at $1.3168 per euro as of 12:32 p.m. in Tokyo from $1.3175 on March 16, and bought 83.47 yen from 83.43.

Berry expects the dollar to appreciate to $1.30 per euro in the next month and to $1.25 in three months, and the euro to trade at 106 yen by the end of the second quarter, UBS says.

Currency strategists have increased forecasts for the dollar against the euro and yen this year. The greenback will trade at $1.30 per euro, down from expectations of $1.45 in September, according to a Bloomberg News survey of 53 analysts. The dollar will trade at 87 yen next year, up from 83 yen forecast earlier this year.

Treasury bonds with yields higher than their German counterparts are luring foreign investors to U.S. debt. Two-year Treasuries yield 0.36 percent, 3 basis points more than similar- maturity German bunds. Six months ago, bunds were yielding 34 basis points more than Treasuries.

‘More Comfortable’
China (HOLDCH), the largest foreign U.S. creditor, increased its holdings of U.S. government securities in January for the first time in six months, boosting them by 0.7 percent to $1.16 trillion, Treasury data released March 15 show.

Organization of Petroleum Exporting Country members boosted net purchases of government debt by $43.3 billion, or 20 percent, in the 12 months ended Jan. 31, compared to a 13 percent rise for non-OPEC foreign holdings.

“Market players feel more comfortable holding U.S. dollars,” said Michael Woolfolk, senior currency strategist in New York at Bank of New York Mellon Corp. (BK), the world’s largest custodial bank, with more than $26 trillion in assets.

Traders’ positions reflect the shift. The difference in the number of wagers by all commercial futures traders on a gain in the dollar versus the euro, yen, pound, Swiss franc and the Canadian, Australian and New Zealand dollars -- so-called net longs -- was 143,884 on March 13, according to CFTC data compiled by Bloomberg. Net shorts, or bets the currency will fall, totaled 387,327 a year ago.

Matching 1999
There have been more positive than negative contracts every week since Sept. 20, matching the stretch ending in July 27, 1999, which was seven months after the introduction of the euro. The Dollar Index (DXY) rose 8.2 percent that year, 7.6 percent in 2000 and 6.6 percent the next year.

Another sign that the dollar is rising in reaction to a strengthening economy is that the typical relationship between the currency and stocks is breaking down.

During September 2008, as Lehman Brothers Holdings Inc. collapsed in the largest U.S. bankruptcy, the Dollar Index gained 6 percent and the Dow Jones Industrial Average slumped 34 percent as investors sought the currency to buy safe Treasuries. The next year stocks rallied 19 percent on optimism about an economic recovery while the currency gauge fell by 4.2 percent and Treasuries lost 3.72 percent as measured by Bank of America Merrill Lynch indexes.

The negative relationship between the dollar and stocks, intact since October 2008, is now breaking down, with the 60-day percent-change correlation rising to minus 43 percent last week from as low as minus 85 percent in December. A reading of minus 100 percent means that the two assets always move in the opposite direction.

‘Significant Development’
The dollar has gained 1.3 percent this month and is down 0.5 percent so far this year, and the Dow Jones Industrial Average (INDU) rose to 13,289 March 16, the highest level since December 2007, and gained 8.3 percent in 2012.

“Typically when we see the Dow up, the dollar is down and that hasn’t happened,” said Woolfolk of Bank of New York Mellon. “That is a very significant development that’s happened rarely since the Lehman crisis.”

Stronger economic data this year damped market expectations of further monetary stimulus after the Fed bought $2.3 trillion of Treasuries and mortgage-backed bonds in two rounds of purchases known as quantitative easing from December 2008 to June 2011. During the second program, which started in November 2010, the Dollar Index fell 3.9 percent.

‘Downside Risks’
Sixty-one percent of respondents in a March 9-12 Bloomberg News survey of economists said Bernanke would refrain from any action to expand the Fed’s $2.89 trillion balance sheet this year. In January, 50 percent predicted more bond buying.

With unemployment at 8.3 percent, above the 10-year average of 6.6 percent, the Fed isn’t ruling out further moves. Strains in financial markets pose “significant downside risks” central bankers said in a statement after the March 13 meeting.

Possible further stimulus, as well as the Fed’s forecast of rates at zero to 0.25 percent through late 2014, will limit dollar gains, according to Jens Nordvig, a managing director of currency research in New York at Nomura Holdings Inc.

“In order to have a real pronounced dollar move we need to have an actual hiking cycle” for interest rates, Nordvig said in a March 14 telephone interview. “As long as we’re in an adjustment phase where U.S. growth expectations are being revised higher, the dollar can gain further in conjunction with risk assets doing OK.”

Strengthening Recovery
The currency has moved higher as U.S. economic data show a strengthening recovery. Employers in February added 227,000 jobs following a revised 284,000 gain in January and the jobless rate remained at a three-year low. Retail sales in February rose by 1.1 percent, the most since September.

Euro zone economies contracted 0.3 percent in the fourth quarter, while Japan shrunk 0.7 percent and the U.K fell 0.2 percent, according to government data.

Policy makers are trying to restore stability and ignite growth by flooding their financial systems with cash. European banks got 529.5 billion euros ($705 billion) in a second round of three-year loans from the European Central Bank on Feb. 29.

The yen has been the worst performing major currency this year, losing 8.5 percent against the dollar, as Bank of Japan (8301) Governor Masaaki Shirakawa indicated last week the central bank will keep using monetary policy as a tool to tackle deflation. The BOJ unexpectedly added 10 trillion yen ($128 billion) to its asset-purchase program on Feb. 14.

‘Different Situation’
Foreign demand for U.S. assets and the increasing use of the euro as a funding currency for so-called carry trades have also helped support the dollar. Net buying of long-term equities, notes and bonds rose to $101 billion in January from $19.2 billion in December, the Treasury said March 15.

“Better U.S. data has helped the dollar versus the euro, sterling and yen,” Brian Kim, a currency strategist in Stamford, Connecticut, at Royal Bank of Scotland Group Plc said in a March 9 telephone interview. “It makes sense that it would be strengthening against those currencies because their central banks are in a bit of a different situation, their economic growth profile and outlook is in a different situation, so we see some advantage for the dollar against them.”

 

[Muthukali]

Dollar Near One-Week Low Versus Euro Before Fed Bernanke

The dollar traded within 0.2 percent of its lowest in a week against the euro on speculation Federal Reserve Chairman Ben Bernanke will reiterate today that a slow U.S. recovery warrants near-zero interest rates.

The greenback remained lower after yesterday falling versus 15 of 16 major peers after gains in U.S. stocks boosted demand for higher-yielding assets. The euro neared a four-month high against the yen before reports this week forecast to show German services and factory output grew in March. Australia’s dollar approached a 10-month high against the yen after minutes showed the Reserve Bank left rates unchanged this month after seeing “somewhat less” downside risk to the economy.

“The Fed is not going to change their recent rhetoric on the economy and they’re going to still characterize the recovery as somewhat tepid,” said Andrew Salter, a strategist at Australia & New Zealand Banking Group Ltd. (ANZ) in Sydney. “The long-term trend that’s in place is U.S. dollar weakness.”

The dollar was at $1.3242 per euro as of 9:16 a.m. in Singapore from $1.3238 in New York yesterday, when it fell as low as $1.3266, the least since March 9. It fetched 83.35 yen from 83.35. The euro bought 110.38 yen from 110.34 after rising as high as 110.57 yesterday, the most since Oct. 31.

Bernanke said March 14 that a “frustratingly slow” recovery in the world’s largest economy was impeding efforts by banks to make profitable loans. Policy makers said the previous day that “elevated” unemployment and a subdued outlook for inflation warranted keeping borrowing costs “exceptionally low” at least through late 2014.

Dollar Declines
Bernanke will give the first of four lectures at George Washington University today and testify before a U.S. House committee about Europe’s debt crisis on March 21.

The dollar has declined 0.6 percent in the past week, the third-worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro has gained 0.7 percent and the yen declined 1.2 percent.

Liquidity in currency markets will be thin today due to a public holiday in Japan, UBS AG said in a research note.

Demand for the 17-nation euro may be bolstered before March 22 data from London-based Markit Economics that’s predicted to show manufacturing and services growth accelerated in Germany. Factory output climbed to 51 this month from 50.2 in February while a gauge of services rose to 53.1 from 52.8, according to the median estimate in Bloomberg News surveys of economists.

ANZ Bank’s Salter predicts the euro will climb to $1.35 by June and $1.37 by September. The currency will trade at $1.29 and $1.30, respectively, according the median forecast in a Bloomberg survey of analysts.

Downside ‘Less Likely’
Australia’s dollar rose toward its highest level in 10 months against the yen after Reserve Bank minutes showed an intensifying mining investment boom and Europe’s easing debt crisis prompted policy makers to keep rates unchanged at 4.25 percent this month.

“Members noted that while this downside risk could still materialize, this seemed somewhat less likely than a few months ago,” the minutes released today by the RBA showed.

The Aussie rose 0.2 percent to 88.55 yen after reaching 88.64 on March 19, the most since May 3. It bought $1.0624 from $1.0607 yesterday.

 

[Muthukali]

Australian, N.Z. Dollars Strengthen Against U.S. Currency

The Australian and New Zealand dollars advanced against the U.S. currency. The so-called Aussie gained 0.2 percent to $1.0504 as of 12:33 p.m. Sydney time from yesterday in New York. The kiwi climbed 0.3 percent to 81.95 U.S. cents.

 

[Muthukali]

Euro Gains After Greece Bailout Vote, Before German PMI

The euro advanced against the dollar and reached a four-month high versus the yen after Greece won parliamentary approval for a new international bailout, boosting demand for the region’s assets.

The 17-nation currency rose against 14 of 16 major counterparts before reports tomorrow forecast to show an expansion of services and factory output in Germany, Europe’s largest economy. The dollar weakened before Federal Reserve Chairman Ben S. Bernanke tells Congress that financial strains in Europe have eased, according to testimony prepared for delivery today. The yen fell before a report tomorrow projected to show Japanese exports declined for a fifth month.

“Some of the reports coming out of Europe and the Greek vote going through is supportive of the euro in the near term,” said Derek Mumford, a director in Sydney at Rochford Capital, a currency-risk management company.

The euro rose 0.3 percent to $1.3267 as of 10:15 a.m. in Tokyo. The 17-nation currency climbed 0.2 percent to 110.97 yen and earlier touched 110.99, the most since Oct. 31. The yen rose 0.1 percent to 83.64 per dollar.

Greece’s Prime Minister Lucas Papademos won approval for a new 130 billion-euro ($172 billion) aid package that will keep the country’s possible financial collapse at bay. A total of 213 lawmakers voted today in favor of the legislation and 79 against, Acting Parliament Speaker Grigoris Niotis said in remarks carried live on state-run Vouli TV.

Demand for the euro may also be bolstered before the release of purchasing managers indexes tomorrow from London- based Markit Economics that are predicted to show manufacturing and services growth accelerated in Germany. A measure of factory output climbed to 51 this month from 50.2 in February while a gauge of services rose to 53.1 from 52.8, according to median projections in Bloomberg News surveys of economists.

 

[Muthukali]

Central bank to strike new exchange rate for the kyat - MYANMAR

Myanmar's central bank plans to set the country's new exchange rate at around 820 kyat per US$1 (30.8 baht), close to its black market level, as the nation pushes ahead with economic reforms, two officials with private Myanmar banks said yesterday.

The change would be a shock for government institutions and state-owned enterprises that have been using the official exchange rate of 6.4 kyat per dollar, the central bank has said. But broader economic waves are unlikely since an exchange rate of around 800 is widely in use.

The bank officials said on the sidelines of an industry event in Kuala Lumpur, where they were speaking, that the new "managed float" system would have a trading band of plus or minus 2%.

"We are now in the auction process, and there is a plan to manage the float of the currency at 820 kyat, plus or minus 2%, to one US dollar," Aung Kyaw Myo, an official of Kanbawza Bank Ltd, said.

The central bank had been expected to set the currency around that level as it moves to unify the country's dual exchange rate in the coming weeks _ Myanmar's boldest economic reform yet as it emerges from decades of isolation.

The government is calculating its national budget for the year from April 1 using an exchange rate of 800 kyat per dollar, a central bank official said last week.

The currency reform is a major step in ending market distortions caused by the dual system and improving transparency as foreign investors pour into the Southeast Asian country following bold economic and political reforms in recent months.

But it could also cause some disruptions and anxiety in a country where memories of economic mismanagement are fresh.

The sudden cancellation of certain banknote denominations by the late dictator General Ne Win in 1987 led to many people's savings being wiped out and helped trigger a pro-democracy uprising the following year.

The kyat's unofficial rate, used in most transactions, has jumped from more than 1,000 per dollar in 2009 as foreign money has flowed into the timber, energy and gem sectors. That has hurt many Myanmar people, from farmers and manufacturers to traders and employees of foreign firms paid in dollars.

"This market-driven reform will boost foreign investment interest," said Douglas Clayton, chief executive of Leopard Capital, a private equity fund focused on emerging Asian markets.

"In terms of growing pains, there could be some imbalances in supply and demand but that will not be unusual in such a transition."

K K Hlaing, a businessman in Myanmar's commercial capital Yangon, said he expected there would be little disruption from the new exchange rate as it was already widely used in business transactions.

"The government is simply formalising the unofficial exchange rates in anticipation for investment," he said.

"There isn't going to be any sudden economic shock with this as the people have been going about their business using the 800-820 kyat range."

 

[Muthukali]

Dollar Remains Higher Before U.S. Jobless Claims Data

The dollar pared a decline against the euro after a private report signaled manufacturing may shrink in China and before U.S data forecast to show initial jobless claims dropped, boosting demand for U.S. assets.

The Australian dollar slid to a two-month low after the preliminary reading of an index from HSBC Holdings Plc and Markit Economics showed China’s manufacturing may contract for a fifth-straight month in March. The yen briefly gained earlier after Japan posted an unexpected trade surplus for February. New Zealand’s dollar slid to a one-week low after its economy grew less than economists estimated.

“The market wants to buy dollars,” said Kurt Magnus, executive director of currency sales in Sydney at Nomura Holdings Inc. “Currently, data is pointing to lower commodity prices and you’ve got resurgent, strong numbers coming out of the United States.”

The dollar bought $1.3222 per euro at 12:04 p.m. in Tokyo from $1.3216 yesterday, when it touched $1.3285, the weakest level since March 8. The U.S. currency was little changed at 83.39 yen from 83.41 yesterday. It earlier dropped to 83.14. The Japanese currency bought 110.25 per euro from 110.23, after earlier rising as much as 0.3 percent.

The Australian dollar dropped 0.7 percent to $1.0383, the lowest since Jan. 20. The New Zealand dollar, known as the kiwi, declined 0.9 percent to 80.85 U.S. cents and earlier touched 80.73 cents, the lowest since March 15.

The gauge of Chinese manufacturing was at 48.1, a four- month low, and compares with a final 49.6 in February. A result above 50 points to expansion and a number below 50 indicates contraction.

New applications for unemployment insurance payments in the U.S. probably fell by 1,000 to 350,000 in the period ended March 17, according to a Bloomberg News survey of economists before the Labor Department releases its figures today. That would be the lowest since March 2008.

 

[Muthukali]

Canadian Dollar Falls on Slower Global Growth Concern

Canada’s dollar depreciated after reports on manufacturing in Europe and China fueled concern that global growth was slowing, spurring demand for the safest of assets, including the U.S. dollar and the yen.

The Canadian currency fell to parity with the greenback for the first time in two weeks. It declined for a third day as a report showed January retail sales grew at less than a third of the rate economists predicted. U.S. equities, crude oil and copper fell as the appetite for higher-yielding assets waned.

“It’s all about the data -- they set the tone right from the get-go,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada (NA) in Toronto. “It is a day of risk abatement as data everywhere conspired against the Canadian dollar.”

Canada’s currency, nicknamed the loonie for the image of the waterfowl on the C$1 coin, weakened 0.7 percent to 99.93 cents per U.S. dollar at 5 p.m. in Toronto. It earlier fell 0.9 percent to trade on a one-for-one basis with the greenback for the first time since March 7. One Canadian dollar buys $1.0007.

Government bonds rose for a third day, the longest streak this month. The benchmark 10-year yield dropped four basis points, or 0.04 percentage point, to 2.20 percent, after rising to 2.297 percent on March 19, the highest since October.

The loonie dropped for a third day to 82.60 yen after an index of euro-area manufacturing and services contracted more than economists forecast in March and a private report showed manufacturing may shrink in China for a fifth month. It is the yen’s longest streak of gains against the Canadian currency since Jan. 31.

‘Disappointing Data’
Retail sales in Canada expanded 0.5 percent in January, as the biggest jump in new car sales in three years was blunted by declines at home-improvement and electronics stores, Statistics Canada said today in Ottawa. That was less than the 1.8 percent median projection of 24 forecasts compiled by Bloomberg News.

“It’s just been a wall of disappointing data,” Shane Enright, executive director at Canadian Imperial Bank of Commerce’s CIBC World Markets unit in Toronto, said in a telephone interview. “The catalyst pushing us toward parity was the soft Canadian retail-sales number.”

The Statistics Canada is expected to announce tomorrow that the consumer price index rose 2.7 percent in February from a year earlier, according to a Bloomberg News survey of 25 economists. The loonie finished little changed on Feb. 17 when the agency announced the measure of inflation increased 2.5 percent in January.

“The consumer price index number is likely to be influential,” Spitz said. “From a closing perspective, anything above 99.90 would be seen as a game changer in momentum.”

The loonie declined 0.4 percent in the past week against nine developed-nation peers tracked by Bloomberg Correlation- Weighted Currency Indexes. The yen was the biggest gainer, adding 1.7 percent, while the U.S. dollar rose 0.5 percent.

 

[Muthukali]

Commodity Currencies Advance as Stocks Gain Boosts Risk Demand

Currencies of commodity-exporting countries, led by New Zealand’s dollar, rose against the U.S. dollar as stocks and raw materials prices gained, boosting demand for assets linked to growth.

Norway’s krone rallied as oil prices surged amid concern about supply disruptions. Japan’s currency rose against the dollar after a report showed purchases of new homes in the U.S. unexpectedly fell in February for a second month, signaling the recovery in the housing market may be uneven. The euro climbed against the yen after falling for three days, prompting bets the move lower was overdone.

“We’ve had a big purge of commodity-currency long positions this week, so it’s possible that the backup in oil has been helpful,” said Ray Attrill, a senior currency strategist at BNP Paribas SA in New York. A long is a bet the price of an asset will rise. “Volatility is low, which means the carry trade is really attractive.”

New Zealand’s dollar rose 1.1 percent to 81.82 U.S. cents at 5 p.m. in New York, paring its weekly loss to 0.8 percent. The euro gained 0.5 percent to $1.3270. The yen rose 0.2 percent to 82.35 per dollar, and was up 1.3 this week in its biggest gain since the last five days of 2011.

The carry trade of using the yen to fund purchases of assets denominated in the Mexican peso, Brazilian real, Norwegian krone and Australian dollar more than doubled today after losing 77 percent in the week through yesterday.

Futures traders decreased their bets that the euro will decline against the U.S. dollar, figures from the Washington- based Commodity Futures Trading Commission show.

The difference in the number of wagers by hedge funds and other large speculators on a decline in the shared currency compared with those on a gain -- so-called net shorts -- was 82,954 on March 20, compared with net shorts of 99,336 a week earlier.

‘Proved Futile’
Sweden’s krona and the Norwegian krone were among the top gainers of the major currencies today. The krona added 0.5 percent to 6.7333 per dollar and Norway’s tender strengthened 0.6 percent to 5.7565.

The krone appreciated after oil surged almost $3 a barrel after Reuters reported Iranian oil exports will drop by 300,000 barrels a day because of tighter sanctions.

Crude rose 1.3 percent to $106.76, reaching as high as $108.25. Norway is the world’s seventh largest oil exporter.

The euro rose for the first time in four days against the dollar after dropping to the lowest in almost a week yesterday amid a decrease in a gauge of euro-area industry based on a survey of purchasing managers.

“There was an attempt to break up through the $1.3290-$1.3295 area, but that’s proved futile,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London.

Inflation Target
The yen weakened earlier today after versus the dollar Bank of Japan Governor Masaaki Shirakawa said the central bank and the government share the same view on the economy, increasing concern the central bank may increase stimulus measures to boost the nation’s economy, which would debase the currency.

Finance Minister Jun Azumi said the Bank of Japan (8301) established an inflation target of 1 percent on Feb. 14, replacing earlier wording that the central bank had an “understanding” of where consumer prices should go. It also said it would add 10 trillion yen ($119 billion) yen of stimulus to the economy.

The Japanese currency breached its 21-day moving average against the euro of 108.61, which will lead to further yen appreciation, with support between 105.43 and 106.8, MacNeil Curry, head of foreign-exchange and interest-rates technical strategy at Bank of America Corp. in New York, wrote in a note. Support refers to a level where buy orders may be clustered.

The euro has dropped 0.5 percent against the yen this week.

Home Sales
U.S. new-home sales dropped 1.6 percent to a 313,000 annual pace, the slowest since October, from a 318,000 rate in January that was weaker than previously reported, figures from the Commerce Department showed today in Washington. The median estimate of 78 economists surveyed by Bloomberg News called for 325,000.

IntercontinentalExchange Inc.’s Dollar Index (DXY), used to track the greenback against the currencies of six major U.S. trading partners including the euro, yen and pound, slid 0.5 percent to 79.345. It rose to as high as 80.738 last week as signs of strength in the U.S. economic recovery damped expectations of further Federal Reserve asset purchases, or quantitative easing.

“You saw the U.S. dollar rallying on good data, which you hadn’t seen in a long time because there was so much focus on QE3 being priced out,” said David Grad, a foreign-exchange strategist at Bank of America in New York. “That intense focus on pricing out on QE3 has calmed and that’s why you’ve seen the risk-on, risk-off trade come back.

‘Turning Point’
Fed Bank of St. Louis President James Bullard said monetary policy may be at a ‘‘turning point” as the world’s largest economy strengthens.

With Fed policy currently “on pause, it may be a good time to take stock of whether we may be at a turning point,” Bullard said in a speech in Hong Kong today. The U.S. economy may expand 3 percent this year, he said, adding that “the outlook has improved markedly” over the past eight months.

The Fed has held its target rate at a range of zero to 0.25 percent since December 2008.

“I don’t think the trend for the dollar to gradually rise against the yen has changed,” said Koji Fukaya, chief currency strategist at Credit Suisse Group AG in Tokyo. “The U.S. economic recovery story hasn’t changed.”

 

[Muthukali]

Euro Gains Versus Yen on Prospect of Combined Rescue Fund

The euro rose for a second day against the yen on prospects Europe may agree to combine two rescue funds to halt the spread of its sovereign-debt crisis.

The 17-nation euro gained before a report forecast to show German business confidence held at the highest level since July. The dollar advanced against the yen before a U.S. report this week that may show orders for durable goods increased in February. The currencies of Australia and New Zealand climbed against the yen as prospects of a recovery in the world’s largest economy boosted demand for higher-yielding assets.

“It’s possible to see euro pick up slightly as people work out the implications of the bailout package and better economic statistics,” said Hans Kunnen, Sydney-based chief economist at St. George Bank Ltd. “Sentiment toward Europe is slowly improving.”

The euro rose 0.4 percent to 109.65 yen as of 12:58 p.m. in Tokyo from the close last week in New York. It traded at $1.3264 from $1.3270 on March 23, when it touched $1.3294, the most since March 2. The dollar rose 0.4 percent to 82.66 yen.

The Australian dollar rose 0.4 percent to 86.48 yen and New Zealand’s currency gained 0.2 percent to 67.50 yen.

European policy makers are discussing how to add to bailout funds, for example by allowing the temporary European Financial Stability Facility and the permanent 500 billion-euro ($664 billion) European Stability Mechanism to work concurrently to make more money available.

Rescue Funds
Deploying unused sums from the temporary fund while allowing the ESM to operate at capacity would bring a total crisis backstop to 692 billion euros. European Union finance ministers meet in Copenhagen starting on March 30.

German Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble have abandoned their opposition to combining the two euro-area rescue funds, Der Spiegel reported, citing unnamed government officials. The two German leaders have agreed that the permanent and temporary rescue funds may be “held in operation” for a transitional period, the magazine said in an e-mailed preview of its article.

The euro was 0.2 percent from a three-week high against the dollar before the Munich-based Ifo institute releases its German business climate index today. The gauge, based on a survey of 7,000 executives, stayed at 109.6 in March, according to a Bloomberg News poll of economists.

The euro climbed 0.6 percent in the past week, according to Bloomberg Correlation Weighted Indexes that track 10 developed market currencies. The yen has strengthened 1.3 percent over the period, while the dollar gained 0.4 percent.

Dollar Gains
The dollar rose for the first time in four days against the yen before a March 28 report projected to show bookings for long-lasting factory goods rose 3 percent last month after decreasing 3.7 percent in January, according to the median estimate of economists surveyed by Bloomberg News.

“The U.S. economic data in the next few weeks will be critical for U.S. dollar prospects,” New York-based Yuki Sakasai and Aroop Chatterjee, currency strategists at Barclays Capital, wrote in a note to clients. “The U.S. dollar would likely find support against yen and Swiss franc.”

Gains may be limited as the U.S. currency’s decline below its 20-day moving average last week may signal a reversal of the greenback’s bullish trend, Gaitame.com Research Institute Ltd. said, citing trading patterns.

The dollar fell to as low as 81.98 yen on March 23, breaching its 20-day moving average for the first time since Feb. 8, said Takuya Kawabata, a Tokyo-based researcher at Gaitame.com, a unit of Japan’s largest currency-margin company. A close below that average, which is at 82.30 today, may signal a “downward correction,” for the dollar, he said.
Frontier Currencies

Foreign-exchange traders, faced with lower volatility and record low interest rates in the U.S., Europe, the U.K. and Japan, are searching for returns as far afield as Kazakhstan and Nigeria. The JPMorgan G7 Volatility Index (JPMVXYG7) has fallen to 10.14 percent from 12.35 percent in December, reducing money managers’ ability to exploit price moves.

Investec Asset Management Ltd., which trades currencies of nations from Colombia to Uganda, said demand for assets in so- called frontier markets increased in the past six months. The Cambridge Strategy (Asset Management) Ltd. invested in the Nigerian naira from December to February. Money manager Adrian Lee & Partners will add positions in six currencies, including Kazakhstan’s tenge and the Kenyan shilling by the end of the second quarter.

Colombia, where mining helped the economy expand 5.9 percent last year and the benchmark rate is 5.25 percent, saw the peso strengthen more than 10 percent this year, tied with Poland’s zloty for the most among more than 170 currencies tracked by Bloomberg. Kenya’s shilling is up 29 percent since October from a record low and Chile’s peso has advanced 6.2 percent against the dollar his year.