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Currencies
- Thread starter Muthukali
- Start date
Aussie, N.Z. Dollars Fall Before Europe Confidence, Jobs
The Australian and New Zealand dollars halted one-day gains from yesterday as concern that fiscal turmoil in Europe is hurting the region’s economic growth curbed demand for higher-yielding assets.
The so-called Aussie weakened versus most of its 16 major counterparts before reports this week that may show confidence remained weak and the jobless rate rose across the 17 nations that share the euro. Australia’s dollar declined even after figures today showed new home sales in the nation climbed last month. New Zealand’s currency fell against its U.S. and Japanese peers after yield premiums on Spain’s debt over Germany’s surged to a 17-year high.
“The uncertainty in Europe and the unknown of how governments are going to fund the recapitalization of banks are impacting the Aussie again today,” said Greg Gibbs, a foreign- exchange strategist at Royal Bank of Scotland Group Plc in Sydney. “It’s pretty clear that several periphery countries are under a lot of stress already.”
Australia’s dollar lost 0.3 percent to 98.27 U.S. cents as of 11:31 a.m. in Sydney after rising 1 percent yesterday, its biggest one-day gain since April 12. The Aussie fell 0.2 percent to 78.13 yen. New Zealand’s currency, often called the kiwi, declined 0.3 percent to 75.98 cents after advancing 1.1 percent yesterday. It slid 0.2 percent to 60.43 yen.
The kiwi has dropped 7.1 percent versus the dollar since April 30, the worst performance among the U.S. currency’s 16 most-traded counterparts, according to data compiled by Bloomberg. The Aussie has fallen 5.7 percent.
Bonds Rise
Australia’s bonds rose, pushing 10-year yields down six basis points, or 0.06 percentage point, to 3.12 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, lost two basis points to 2.46 percent.
Consumer confidence in the euro area was at minus 19.3 in May, from minus 19.9 in April, according to a Bloomberg News survey before the final reading is released tomorrow. The jobless rate climbed to 11 percent in April, the highest in data compiled by Bloomberg going back to 1990, economists forecast in a separate survey before the June 1 report.
The extra yield investors demand to hold Spain’s 10-year bonds instead of similar-maturity German notes soared to 5.12 percentage points yesterday, the most since 1995, according to data compiled by Bloomberg.
In Australia, a private report by the Housing Industry Association showed sales of newly built homes rose 6.9 percent last month to 5,816, the biggest increase in more than two years. That compares with a 9.4 percent drop to a record low in March, according to the data.
Australia’s dollar has declined 2.1 percent this year, the second-worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. Its New Zealand counterpart dropped 0.5 percent.
The Australian and New Zealand dollars halted one-day gains from yesterday as concern that fiscal turmoil in Europe is hurting the region’s economic growth curbed demand for higher-yielding assets.
The so-called Aussie weakened versus most of its 16 major counterparts before reports this week that may show confidence remained weak and the jobless rate rose across the 17 nations that share the euro. Australia’s dollar declined even after figures today showed new home sales in the nation climbed last month. New Zealand’s currency fell against its U.S. and Japanese peers after yield premiums on Spain’s debt over Germany’s surged to a 17-year high.
“The uncertainty in Europe and the unknown of how governments are going to fund the recapitalization of banks are impacting the Aussie again today,” said Greg Gibbs, a foreign- exchange strategist at Royal Bank of Scotland Group Plc in Sydney. “It’s pretty clear that several periphery countries are under a lot of stress already.”
Australia’s dollar lost 0.3 percent to 98.27 U.S. cents as of 11:31 a.m. in Sydney after rising 1 percent yesterday, its biggest one-day gain since April 12. The Aussie fell 0.2 percent to 78.13 yen. New Zealand’s currency, often called the kiwi, declined 0.3 percent to 75.98 cents after advancing 1.1 percent yesterday. It slid 0.2 percent to 60.43 yen.
The kiwi has dropped 7.1 percent versus the dollar since April 30, the worst performance among the U.S. currency’s 16 most-traded counterparts, according to data compiled by Bloomberg. The Aussie has fallen 5.7 percent.
Bonds Rise
Australia’s bonds rose, pushing 10-year yields down six basis points, or 0.06 percentage point, to 3.12 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, lost two basis points to 2.46 percent.
Consumer confidence in the euro area was at minus 19.3 in May, from minus 19.9 in April, according to a Bloomberg News survey before the final reading is released tomorrow. The jobless rate climbed to 11 percent in April, the highest in data compiled by Bloomberg going back to 1990, economists forecast in a separate survey before the June 1 report.
The extra yield investors demand to hold Spain’s 10-year bonds instead of similar-maturity German notes soared to 5.12 percentage points yesterday, the most since 1995, according to data compiled by Bloomberg.
In Australia, a private report by the Housing Industry Association showed sales of newly built homes rose 6.9 percent last month to 5,816, the biggest increase in more than two years. That compares with a 9.4 percent drop to a record low in March, according to the data.
Australia’s dollar has declined 2.1 percent this year, the second-worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. Its New Zealand counterpart dropped 0.5 percent.
Yen Rises Against Major Peers on Europe’s Credit Crisis
The yen gained against its major peers as turmoil in the Spanish banking sector added to signs Europe’s debt crisis is spreading to the region’s larger economies, boosting demand for safer assets.
The yen reached a more than three-month high versus the greenback as Japan’s benchmark bond yield fell to the lowest level since 2003 amid losses in global shares. The euro slid for an eighth-straight day against the yen, the longest losing streak in almost two years, before data tomorrow forecast to show the jobless rate rose to a record and manufacturing contracted across the 17 nations that share the currency.
“Things are quite unpredictable in Europe,” said Janu Chan, an economist at St. George Bank Ltd. in Sydney. “Yen has quite strong support. The dollar has also quite strong support. They could be getting bid for safety.”
The yen rose 0.1 percent to 97.65 per euro as of 9:47 a.m. in Tokyo from the close yesterday in New York, extending its gains to an eighth day, the longest advance since June 2010. The Japanese currency strengthened 0.2 percent to 78.94 per dollar, after earlier touching 78.86, the strongest since Feb. 17. The euro dropped to $1.2358, its weakest since July 2010, before trading little changed at $1.2370.
The shared currency reached $1.1877 in June of 2010, which was the lowest level in four years, after escalating concern about Greece led to the bloc’s first bailout. Since its inception in 1999, the euro has traded as low as 82.30 U.S. cents, in 2000, and as high as $1.6038 in July 2008.
ECB Denial
The MSCI Asia Pacific Index of stocks fell 1 percent today. The Standard & Poor’s 500 Index of U.S. stocks lost 1.4 percent yesterday, while the MSCI World Index sank 1.7 percent.
Yields on Japan’s 10-year government notes declined to as low as 0.81 percent today, the least since July 2003.
The European Central Bank denied it has rejected a plan floated by the Spanish government to recapitalize Bankia group, the nation’s third-largest lender, saying it hasn’t been approached. The Spanish government itself has backtracked on an idea to recapitalize Bankia by injecting sovereign debt into its parent company that, according to the Financial Times, could then be used as collateral to borrow from the ECB.
Spain’s 10-year bond yield rose as high as 6.70 percent yesterday, approaching the 7 percent level that led to bailouts in Greece, Ireland and Portugal.
A gauge of euro-area manufacturing decreased to 45 in May from 45.9 in April, the lowest in 35 months, according to a Bloomberg News survey of economists before London-based Markit Economics releases its final reading tomorrow. The unemployment rate probably climbed to 11 percent last month, the highest in data compiled by Bloomberg going back to 1990, a separate poll showed before the report tomorrow.
The euro has declined 1.5 percent in the past month against nine developed-market counterparts tracked by Bloomberg Correlation-Weighted Indexes. The yen climbed 7.7 percent, the best performer, while the dollar strengthened 6.3 percent.
The yen gained against its major peers as turmoil in the Spanish banking sector added to signs Europe’s debt crisis is spreading to the region’s larger economies, boosting demand for safer assets.
The yen reached a more than three-month high versus the greenback as Japan’s benchmark bond yield fell to the lowest level since 2003 amid losses in global shares. The euro slid for an eighth-straight day against the yen, the longest losing streak in almost two years, before data tomorrow forecast to show the jobless rate rose to a record and manufacturing contracted across the 17 nations that share the currency.
“Things are quite unpredictable in Europe,” said Janu Chan, an economist at St. George Bank Ltd. in Sydney. “Yen has quite strong support. The dollar has also quite strong support. They could be getting bid for safety.”
The yen rose 0.1 percent to 97.65 per euro as of 9:47 a.m. in Tokyo from the close yesterday in New York, extending its gains to an eighth day, the longest advance since June 2010. The Japanese currency strengthened 0.2 percent to 78.94 per dollar, after earlier touching 78.86, the strongest since Feb. 17. The euro dropped to $1.2358, its weakest since July 2010, before trading little changed at $1.2370.
The shared currency reached $1.1877 in June of 2010, which was the lowest level in four years, after escalating concern about Greece led to the bloc’s first bailout. Since its inception in 1999, the euro has traded as low as 82.30 U.S. cents, in 2000, and as high as $1.6038 in July 2008.
ECB Denial
The MSCI Asia Pacific Index of stocks fell 1 percent today. The Standard & Poor’s 500 Index of U.S. stocks lost 1.4 percent yesterday, while the MSCI World Index sank 1.7 percent.
Yields on Japan’s 10-year government notes declined to as low as 0.81 percent today, the least since July 2003.
The European Central Bank denied it has rejected a plan floated by the Spanish government to recapitalize Bankia group, the nation’s third-largest lender, saying it hasn’t been approached. The Spanish government itself has backtracked on an idea to recapitalize Bankia by injecting sovereign debt into its parent company that, according to the Financial Times, could then be used as collateral to borrow from the ECB.
Spain’s 10-year bond yield rose as high as 6.70 percent yesterday, approaching the 7 percent level that led to bailouts in Greece, Ireland and Portugal.
A gauge of euro-area manufacturing decreased to 45 in May from 45.9 in April, the lowest in 35 months, according to a Bloomberg News survey of economists before London-based Markit Economics releases its final reading tomorrow. The unemployment rate probably climbed to 11 percent last month, the highest in data compiled by Bloomberg going back to 1990, a separate poll showed before the report tomorrow.
The euro has declined 1.5 percent in the past month against nine developed-market counterparts tracked by Bloomberg Correlation-Weighted Indexes. The yen climbed 7.7 percent, the best performer, while the dollar strengthened 6.3 percent.
Dollar Proves Biggest Winner in Month as Investors Drop Stocks
The dollar posted its biggest monthly gain since 2011 in May, beating bonds, stocks and commodities for the for the first time this year as investors sought refuge in U.S. assets while Europe’s sovereign crisis worsened.
Intercontinental Exchange Inc.’s Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, climbed 5.5 percent in May. Global fixed-income assets gained 0.9 percent through May 30, including reinvested interest, Bank of America Merrill Lynch indexes show. The MSCI All-Country World Index of stocks lost 8.8 percent with dividends, while the Standard & Poor’s GSCI Total Return Index of metals, fuels and agricultural products fell 13 percent.
“The dollar’s had a fabulous month,” Camilla Sutton, chief currency strategist at Bank of Nova Scotia’s Scotia Capital unit in Toronto, said May 30 in a telephone interview. “We’re in a bout of significant risk aversion, which drives funds to the deepest capital markets in the world, the U.S., and creates a significant bid for the U.S. dollar.”
Gross domestic product worldwide may expand 2.5 percent this year, down from 2.9 percent in 2011, according to the median estimate of economists in separate polls by Bloomberg surveyed by Bloomberg. Yields on Treasuries due in 10 years fell to a record 1.53 percent this week and those of two-year German bunds declined to zero.
Stocks, Commodities
At the same time, Spanish 10-year yields climbed to 6.7 percent, the highest since November 2011, as the nation weighs a 19 billion euro ($23.5 billion) bailout of Bankia group, its third-largest bank.
Global stocks had their biggest monthly losses since September, when Chinese manufacturing and German retail sales bolstered speculation that growth is slowing. Commodities fell the most in two years.
European elections in May altered Europe’s political balance when French President Nicolas Sarkozy was defeated by Francois Hollande, a Socialist who challenged Germany’s pro- austerity doctrine.
Greece, which failed to form a government when a party opposed to the nation’s international bailout won more seats than forecast, has set an election this month that’s shaping up as a ballot on whether the country should remain in the euro.
There’s about a 60 percent chance that Greece will leave the common European currency by the end of the summer, according to Michael Woolfolk, a managing director and senior currency strategist in New York at Bank of New York Mellon Corp., the world’s largest custodial bank.
China, U.S.
“The largest fundamental is the crisis in Europe right now, with attention focused on Greece and prospects for them leaving the euro zone,” Woolfolk said May 30 in a telephone interview.
Gross domestic product in China, whose biggest export market is Europe, will increase 8.2 percent this year, the least since 1999, according to the median estimate in a Bloomberg survey of economists. In the U.S., reports last month all showed a drop in consumer confidence, manufacturing activity and orders for durable goods excluding transportation.
Last month’s gain in the Dollar Index was its biggest since surging 5.99 percent in September. The gauge is up 3.6 percent this year to 83.1, its highest level since 2010. Strategists have boosted their-year end forecast for the index, to 80.2 from 76.85 in early January, according to the median estimate of 9 analysts surveyed by Bloomberg.
‘One Thing’
Central banks and investors seeking safe assets “have only one thing to buy right now,” Douglas Borthwick, head of foreign-exchange trading at Faros Trading LLC in Stamford, Connecticut, said May 29 in an interview with Trish Regan and Adam Johnson on Bloomberg Television’s “Street Smart.”
“They’re forced into owning the dollar,” he said. “Not because they like it or they think the dollar is going to rally, but because there’s nothing out there for them to buy.”
Japan’s yen was the only one of the 16 major currencies tracked by Bloomberg to strengthen against the dollar, rising 1.92 percent. Mexico’s peso tumbled the most, losing 9.5 percent, ahead of South Africa’s rand’s 8.8 percent slide and 7.9 percent drop in New Zealand’s dollar. The euro fell 6.6 percent.
The U.S. is one of only five major economies with credit- default swaps on their debt trading at less than 100 basis points, meaning they are viewed as almost risk free. A year ago, eight Group-of-10 nations fit that category, data compiled by Bloomberg show.
Less Quality
The five economies with default swaps trading at less than 100 basis points -- the U.S., U.K., Germany, Sweden and Switzerland -- have a combined $14 trillion in debt, with the U.S. accounting for 75 percent, according to CMA data compiled by Bloomberg as of May 25. When there were eight nations, the total was $24 trillion, with America making up 38 percent. Swaps on Germany climbed to 102.2 basis points yesterday.
Bank of America Merrill Lynch’s Global Broad Market Index, which tracks more than 19,600 securities with a market value of $43 trillion, gained for a second-straight month as of May 30, bringing its year-to-date return to 2.8 percent. That compares with 1.94 percent during the same period a year ago, when the index posted a total return for 2011 of 5.9 percent, the most since 2002.
Average yields fell to 1.95 percent as of May 30 from 2.24 percent at the end of 2011 and 2.68 percent in May 2011.
Denmark’s bonds were the best performers among the 26 sovereign markets tracked by Bloomberg and the European Federation of Financial Analysts Societies, rising 4.7 percent. The Netherlands was next, with a 3.8 percent gain, followed by the U.K.’s 3.7 percent return.
Greece was the worst performer, losing 41 percent, followed by Spain at 4.9 percent and Ireland at 3.8 percent.
Treasuries, Corporates
U.S. Treasuries, perceived as the safest of assets, gained 1.6 percent as of May 30, led by a 8.2 percent return for 30- year bonds in their best month since September, Bank of America Merrill Lynch index data show. Yields on 10-year U.S. government debt are forecast to climb to 2.25 percent by September, according to the median estimate of economists surveyed by Bloomberg.
Investment-grade corporate debt rose 0.42 percent as of May 30, while high-yield, high-risk bonds lost 1.77 percent, snapping five-straight monthly gains. Speculative-grade debt is rated below Baa3 by Moody’s Investors Service and less than BBB- at S&P.
Almost $4 trillion was erased from equity values as the MSCI All-Country World Index of stocks had its biggest decline since September, falling 9.3 percent.
‘Raw’ Nerves
“Investors’ nerves are raw,” Keith Wirtz, who oversees $15 billion as chief investment officer for Fifth Third Asset Management in Cincinnati, said in a May 30 telephone interview. “Europe is a problem, China is another question and there’s concern about global growth. People are very edgy. It doesn’t take much to spook people.”
U.S. stocks slumped for a second month, following the best first-quarter gain for the Standard & Poor’s 500 Index since 1998. The benchmark measure slid 6 percent for the biggest loss since September. Facebook Inc. (FB) tumbled 22 percent following its $16 billion initial public offering. Shares of the social- networking site posted the worst return in the first five days of trading among the 10 biggest U.S. IPOs from the past decade, data compiled by Bloomberg show.
The S&P 500 will climb to 1,430 from 1,310 yesterday by year-end, according to the median estimate of economists surveyed by Bloomberg.
The Stoxx Europe 600 Index dropped 5.8 percent, the most since August. The MSCI Asia Pacific Index (MXAP) slumped 9.8 percent for the biggest monthly decline since October 2008, during the aftermath of Lehman Brothers Holdings Inc.’s bankruptcy filing.
The dollar posted its biggest monthly gain since 2011 in May, beating bonds, stocks and commodities for the for the first time this year as investors sought refuge in U.S. assets while Europe’s sovereign crisis worsened.
Intercontinental Exchange Inc.’s Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, climbed 5.5 percent in May. Global fixed-income assets gained 0.9 percent through May 30, including reinvested interest, Bank of America Merrill Lynch indexes show. The MSCI All-Country World Index of stocks lost 8.8 percent with dividends, while the Standard & Poor’s GSCI Total Return Index of metals, fuels and agricultural products fell 13 percent.
“The dollar’s had a fabulous month,” Camilla Sutton, chief currency strategist at Bank of Nova Scotia’s Scotia Capital unit in Toronto, said May 30 in a telephone interview. “We’re in a bout of significant risk aversion, which drives funds to the deepest capital markets in the world, the U.S., and creates a significant bid for the U.S. dollar.”
Gross domestic product worldwide may expand 2.5 percent this year, down from 2.9 percent in 2011, according to the median estimate of economists in separate polls by Bloomberg surveyed by Bloomberg. Yields on Treasuries due in 10 years fell to a record 1.53 percent this week and those of two-year German bunds declined to zero.
Stocks, Commodities
At the same time, Spanish 10-year yields climbed to 6.7 percent, the highest since November 2011, as the nation weighs a 19 billion euro ($23.5 billion) bailout of Bankia group, its third-largest bank.
Global stocks had their biggest monthly losses since September, when Chinese manufacturing and German retail sales bolstered speculation that growth is slowing. Commodities fell the most in two years.
European elections in May altered Europe’s political balance when French President Nicolas Sarkozy was defeated by Francois Hollande, a Socialist who challenged Germany’s pro- austerity doctrine.
Greece, which failed to form a government when a party opposed to the nation’s international bailout won more seats than forecast, has set an election this month that’s shaping up as a ballot on whether the country should remain in the euro.
There’s about a 60 percent chance that Greece will leave the common European currency by the end of the summer, according to Michael Woolfolk, a managing director and senior currency strategist in New York at Bank of New York Mellon Corp., the world’s largest custodial bank.
China, U.S.
“The largest fundamental is the crisis in Europe right now, with attention focused on Greece and prospects for them leaving the euro zone,” Woolfolk said May 30 in a telephone interview.
Gross domestic product in China, whose biggest export market is Europe, will increase 8.2 percent this year, the least since 1999, according to the median estimate in a Bloomberg survey of economists. In the U.S., reports last month all showed a drop in consumer confidence, manufacturing activity and orders for durable goods excluding transportation.
Last month’s gain in the Dollar Index was its biggest since surging 5.99 percent in September. The gauge is up 3.6 percent this year to 83.1, its highest level since 2010. Strategists have boosted their-year end forecast for the index, to 80.2 from 76.85 in early January, according to the median estimate of 9 analysts surveyed by Bloomberg.
‘One Thing’
Central banks and investors seeking safe assets “have only one thing to buy right now,” Douglas Borthwick, head of foreign-exchange trading at Faros Trading LLC in Stamford, Connecticut, said May 29 in an interview with Trish Regan and Adam Johnson on Bloomberg Television’s “Street Smart.”
“They’re forced into owning the dollar,” he said. “Not because they like it or they think the dollar is going to rally, but because there’s nothing out there for them to buy.”
Japan’s yen was the only one of the 16 major currencies tracked by Bloomberg to strengthen against the dollar, rising 1.92 percent. Mexico’s peso tumbled the most, losing 9.5 percent, ahead of South Africa’s rand’s 8.8 percent slide and 7.9 percent drop in New Zealand’s dollar. The euro fell 6.6 percent.
The U.S. is one of only five major economies with credit- default swaps on their debt trading at less than 100 basis points, meaning they are viewed as almost risk free. A year ago, eight Group-of-10 nations fit that category, data compiled by Bloomberg show.
Less Quality
The five economies with default swaps trading at less than 100 basis points -- the U.S., U.K., Germany, Sweden and Switzerland -- have a combined $14 trillion in debt, with the U.S. accounting for 75 percent, according to CMA data compiled by Bloomberg as of May 25. When there were eight nations, the total was $24 trillion, with America making up 38 percent. Swaps on Germany climbed to 102.2 basis points yesterday.
Bank of America Merrill Lynch’s Global Broad Market Index, which tracks more than 19,600 securities with a market value of $43 trillion, gained for a second-straight month as of May 30, bringing its year-to-date return to 2.8 percent. That compares with 1.94 percent during the same period a year ago, when the index posted a total return for 2011 of 5.9 percent, the most since 2002.
Average yields fell to 1.95 percent as of May 30 from 2.24 percent at the end of 2011 and 2.68 percent in May 2011.
Denmark’s bonds were the best performers among the 26 sovereign markets tracked by Bloomberg and the European Federation of Financial Analysts Societies, rising 4.7 percent. The Netherlands was next, with a 3.8 percent gain, followed by the U.K.’s 3.7 percent return.
Greece was the worst performer, losing 41 percent, followed by Spain at 4.9 percent and Ireland at 3.8 percent.
Treasuries, Corporates
U.S. Treasuries, perceived as the safest of assets, gained 1.6 percent as of May 30, led by a 8.2 percent return for 30- year bonds in their best month since September, Bank of America Merrill Lynch index data show. Yields on 10-year U.S. government debt are forecast to climb to 2.25 percent by September, according to the median estimate of economists surveyed by Bloomberg.
Investment-grade corporate debt rose 0.42 percent as of May 30, while high-yield, high-risk bonds lost 1.77 percent, snapping five-straight monthly gains. Speculative-grade debt is rated below Baa3 by Moody’s Investors Service and less than BBB- at S&P.
Almost $4 trillion was erased from equity values as the MSCI All-Country World Index of stocks had its biggest decline since September, falling 9.3 percent.
‘Raw’ Nerves
“Investors’ nerves are raw,” Keith Wirtz, who oversees $15 billion as chief investment officer for Fifth Third Asset Management in Cincinnati, said in a May 30 telephone interview. “Europe is a problem, China is another question and there’s concern about global growth. People are very edgy. It doesn’t take much to spook people.”
U.S. stocks slumped for a second month, following the best first-quarter gain for the Standard & Poor’s 500 Index since 1998. The benchmark measure slid 6 percent for the biggest loss since September. Facebook Inc. (FB) tumbled 22 percent following its $16 billion initial public offering. Shares of the social- networking site posted the worst return in the first five days of trading among the 10 biggest U.S. IPOs from the past decade, data compiled by Bloomberg show.
The S&P 500 will climb to 1,430 from 1,310 yesterday by year-end, according to the median estimate of economists surveyed by Bloomberg.
The Stoxx Europe 600 Index dropped 5.8 percent, the most since August. The MSCI Asia Pacific Index (MXAP) slumped 9.8 percent for the biggest monthly decline since October 2008, during the aftermath of Lehman Brothers Holdings Inc.’s bankruptcy filing.
BRIC’s Lose
The MSCI BRIC Index entered a bear market last month as it plunged more than 20 percent from the March peak. The gauge tracks shares in Brazil (IBOV), Russia, India and China, the biggest emerging markets.
The Standard & Poor’s GSCI Total Return Index of 24 raw materials slumped 13 percent in May, the most in two years. Cotton, corn and oil led the declines. China is the world’s largest consumer of everything from soybeans and pork to cotton and copper.
“The hardest-hit commodities have been those most tied to the macro outlook.” Nic Johnson, a portfolio manager who helps oversee about $30 billion in commodities at Pacific Investment Management Co. in Newport Beach, California, said in a telephone interview on May 30.
Copper fell 12 percent in May on the Comex in New York, the biggest loss since September. Cotton traded on ICE Futures U.S. in New York plunged 20 percent, the biggest slide in 13 months. The International Cotton Advisory Committee said inventories will climb to the highest relative to demand since 1998.
Silver, Gold
Silver futures fell 11 percent in May, the third straight monthly drop, marking the longest losing streak since October 2008. Gold futures dropped for the fourth straight month, the worst run since 2000. It is now little changed for the year, having declined 19 percent from the record $1,923.70 an ounce reached in September.
The yellow metal has risen for 11 consecutive years, the longest winning streak since at least 1920 in London. Since bullion-backed exchange-traded products were introduced in 2003, investors accumulated $119.2 billion of metal, data compiled by Bloomberg show. Gold Goldman Sachs Group Inc. predicts bullion will rise to $1,940 in 12 months.
Oil plunged 17 percent as Europe’s debt crisis deepened and North America’s production boom swelled stockpiles at Cushing, Oklahoma, the delivery point for futures on the New York Mercantile Exchange.
‘First Step’
Energy Department data show inventories at the hub climbed to a record 46.8 million barrels as of May 18, a day before the switch of the Seaway pipeline that will carry as much as 150,000 barrels day away from Cushing to Gulf Coast refineries.
“Seaway is the first step but it’s not going to reduce inventories right away,” said Phil Flynn, an analyst at futures brokerage PFGBest in Chicago. “In the long term it’s going to make a difference.”
Oil may rebound once a European Union embargo on exports from Iran, the second-largest producer in the Organization of Petroleum Exporting Countries, takes effect, according to analysts at Goldman Sachs and Commerzbank AG. The next round of talks with Iran on its nuclear program is scheduled for June 18 and June 19 in Moscow.
“As Iranian supplies are increasingly shut out from the market as the sanctions take effect, that surplus is disappearing,” David Greely, head of energy research at Goldman in New York, said in a May 21 report.
‘Big Worry’
U.S. natural gas was one of five commodities on the GSCI Index to gain last month, advancing 6 percent as power plants switched away from higher-priced coal.
Riskier assets have fallen and the dollar has climbed as Europe’s crisis sends shock-waves through markets worldwide, John Lonski, chief economist at Moody’s Capital Markets Group in New York, said May 31 in a telephone interview.
“Until Europe’s situation is sufficiently resolved, the dollar will continue to strengthen, especially against the euro,” he said. Markets have been roiled by worries of “Greece leaving the euro and further destabilization, further contagion, setting off a run on banks in other European economies. That’s a big worry,” Lonski said.
The MSCI BRIC Index entered a bear market last month as it plunged more than 20 percent from the March peak. The gauge tracks shares in Brazil (IBOV), Russia, India and China, the biggest emerging markets.
The Standard & Poor’s GSCI Total Return Index of 24 raw materials slumped 13 percent in May, the most in two years. Cotton, corn and oil led the declines. China is the world’s largest consumer of everything from soybeans and pork to cotton and copper.
“The hardest-hit commodities have been those most tied to the macro outlook.” Nic Johnson, a portfolio manager who helps oversee about $30 billion in commodities at Pacific Investment Management Co. in Newport Beach, California, said in a telephone interview on May 30.
Copper fell 12 percent in May on the Comex in New York, the biggest loss since September. Cotton traded on ICE Futures U.S. in New York plunged 20 percent, the biggest slide in 13 months. The International Cotton Advisory Committee said inventories will climb to the highest relative to demand since 1998.
Silver, Gold
Silver futures fell 11 percent in May, the third straight monthly drop, marking the longest losing streak since October 2008. Gold futures dropped for the fourth straight month, the worst run since 2000. It is now little changed for the year, having declined 19 percent from the record $1,923.70 an ounce reached in September.
The yellow metal has risen for 11 consecutive years, the longest winning streak since at least 1920 in London. Since bullion-backed exchange-traded products were introduced in 2003, investors accumulated $119.2 billion of metal, data compiled by Bloomberg show. Gold Goldman Sachs Group Inc. predicts bullion will rise to $1,940 in 12 months.
Oil plunged 17 percent as Europe’s debt crisis deepened and North America’s production boom swelled stockpiles at Cushing, Oklahoma, the delivery point for futures on the New York Mercantile Exchange.
‘First Step’
Energy Department data show inventories at the hub climbed to a record 46.8 million barrels as of May 18, a day before the switch of the Seaway pipeline that will carry as much as 150,000 barrels day away from Cushing to Gulf Coast refineries.
“Seaway is the first step but it’s not going to reduce inventories right away,” said Phil Flynn, an analyst at futures brokerage PFGBest in Chicago. “In the long term it’s going to make a difference.”
Oil may rebound once a European Union embargo on exports from Iran, the second-largest producer in the Organization of Petroleum Exporting Countries, takes effect, according to analysts at Goldman Sachs and Commerzbank AG. The next round of talks with Iran on its nuclear program is scheduled for June 18 and June 19 in Moscow.
“As Iranian supplies are increasingly shut out from the market as the sanctions take effect, that surplus is disappearing,” David Greely, head of energy research at Goldman in New York, said in a May 21 report.
‘Big Worry’
U.S. natural gas was one of five commodities on the GSCI Index to gain last month, advancing 6 percent as power plants switched away from higher-priced coal.
Riskier assets have fallen and the dollar has climbed as Europe’s crisis sends shock-waves through markets worldwide, John Lonski, chief economist at Moody’s Capital Markets Group in New York, said May 31 in a telephone interview.
“Until Europe’s situation is sufficiently resolved, the dollar will continue to strengthen, especially against the euro,” he said. Markets have been roiled by worries of “Greece leaving the euro and further destabilization, further contagion, setting off a run on banks in other European economies. That’s a big worry,” Lonski said.
Euro Shorts Reach Record as Spain, Greece Concern Damp Demand
Futures traders boosted bets that the euro will depreciate against the dollar to a record high as concern increased that Spain’s banking crisis will worsen and Greece may exit the 17-nation currency union.
Hedge funds and other large speculators increased wagers on a euro drop for a fourth straight week in the five days ended May 29, Commodity Futures Trading Commission data showed today. The surge came during a week in which Greece’s anti-bailout political party gained in the polls and as Spanish leaders debated how to recapitalize Bankia group.
“Positions are getting more extended,” said Brian Kim, a currency strategist in Stamford, Connecticut, at Royal Bank of Scotland Group Plc. “It’s not just because of the crisis, but also data getting weak and expectations that the ECB could ease in the second half of the year.”
The difference in the number of wagers on a decline in the shared currency compared with those on a gain, known as net shorts, was 203,415, the most since the euro’s inception in 1999. It was the third consecutive weekly record.
The euro rose 0.5 percent to $1.2427 at 4:47 p.m. in New York and fell as low as $1.2288, a level not seen since July 2010. It dropped to 95.60 yen, the lowest since November 2000.
Spanish 10-year bond yields surged to 6.7 percent May 30, a level last reached in November. The Bankia group, a Spanish lender nationalized last month, will seek 19 billion euros ($23.8 billion) of government funds as it provisions against real-estate and non-property loans, according to a regulatory filing.
Greece Election
The nation earlier this week backtracked on a plan to use government debt instead of cash to bailout BFA-Bankia, the nation’s third-largest lender, as Prime Minister Mariano Rajoy struggles to shore up the nation’s lenders without overburdening public finances.
A Greek poll on May 24 showed the Syriza party, which is opposed to implementing the country’s international rescue program, with 27.2 percent support ahead of June 17 elections. A poll today showed New Democracy, the largest pro-bailout party, leading the Syriza party with 22.7 percent support against Syriza’s 22 percent. Greek parties failed to form a coalition government following an inconclusive May 6 election.
The European Central Bank meets June 6. It has left its benchmark interest rate unchanged at 1 percent since cutting rates twice by 25 basis points each time in November and December last year.
Futures traders boosted bets that the euro will depreciate against the dollar to a record high as concern increased that Spain’s banking crisis will worsen and Greece may exit the 17-nation currency union.
Hedge funds and other large speculators increased wagers on a euro drop for a fourth straight week in the five days ended May 29, Commodity Futures Trading Commission data showed today. The surge came during a week in which Greece’s anti-bailout political party gained in the polls and as Spanish leaders debated how to recapitalize Bankia group.
“Positions are getting more extended,” said Brian Kim, a currency strategist in Stamford, Connecticut, at Royal Bank of Scotland Group Plc. “It’s not just because of the crisis, but also data getting weak and expectations that the ECB could ease in the second half of the year.”
The difference in the number of wagers on a decline in the shared currency compared with those on a gain, known as net shorts, was 203,415, the most since the euro’s inception in 1999. It was the third consecutive weekly record.
The euro rose 0.5 percent to $1.2427 at 4:47 p.m. in New York and fell as low as $1.2288, a level not seen since July 2010. It dropped to 95.60 yen, the lowest since November 2000.
Spanish 10-year bond yields surged to 6.7 percent May 30, a level last reached in November. The Bankia group, a Spanish lender nationalized last month, will seek 19 billion euros ($23.8 billion) of government funds as it provisions against real-estate and non-property loans, according to a regulatory filing.
Greece Election
The nation earlier this week backtracked on a plan to use government debt instead of cash to bailout BFA-Bankia, the nation’s third-largest lender, as Prime Minister Mariano Rajoy struggles to shore up the nation’s lenders without overburdening public finances.
A Greek poll on May 24 showed the Syriza party, which is opposed to implementing the country’s international rescue program, with 27.2 percent support ahead of June 17 elections. A poll today showed New Democracy, the largest pro-bailout party, leading the Syriza party with 22.7 percent support against Syriza’s 22 percent. Greek parties failed to form a coalition government following an inconclusive May 6 election.
The European Central Bank meets June 6. It has left its benchmark interest rate unchanged at 1 percent since cutting rates twice by 25 basis points each time in November and December last year.
Shirakawa Bows to Yen Bulls as Intervention Fails
Bank of Japan Governor Masaaki Shirakawa is being steamrolled by investors pushing the yen toward a post-World War II high against the dollar, negating his attempts to weaken the currency.
After depreciating 10.4 percent in the first quarter, the most since 1995, the yen is up 13.4 percent since March, the best among 10 developed-nation currencies, according to data compiled by Bloomberg. The rebound from an almost 10-month low reached March 21 is set to continue as the fallout from Europe’s debt crisis rattles markets from the U.S. to China, say an increasing number of investors and strategists from Tokyo to London and New York.
“All investors know that intervention will not stop the yen strength,” Yuuki Sakurai, chief executive officer at Fukoku Capital Management Inc. in Tokyo, which manages $7.3 billion of assets, said in a telephone interview on May 30. “Intervening at this stage would be unwise and a waste of money. As long as Europe remains in a state of confusion, yen will continue to be bought for its relative safety.”
Japan sold 14.3 trillion yen ($183.3 billion) last year, the third-most on record, Ministry of Finance data show, to slow its gains after the country was struck by an earthquake and the worst nuclear crisis in a generation. While officials said last week they are ready to take further action to prevent the yen’s strength from damaging Japan’s nascent economic recovery, currency traders pushed it to its biggest weekly gain of 2012. Hedge funds have cut bets it will weaken versus the dollar by 83 percent from an almost five-year high in March.
Exceeding 1995
The yen may rise to as much as 75 per dollar, Sakurai said. It ended June 1 at 78.02 per dollar, up about 2.1 percent on the week. Against the euro, it strengthened 2.8 percent to 97.01.
Japan’s currency is stronger now than the 80 per dollar level reached in 1995, when global coordinated intervention sent it tumbling to 147.66 over the next three years.
Even with the gains, the yen isn’t overvalued compared with 1995, according to strategists at New York-based Morgan Stanley. They said in a report dated May 31 that on a trade-weighted basis, the yen is “roughly” in line with its average over the past two decades and would need to appreciate to about 55 per dollar to equal its strength in the mid 1990s.
“The discrepancy between nominal and real valuation reflects improved Japanese competitiveness as a consequence of deflationary declines in domestic prices and wages,” Ronald Leven, an executive director and strategist at Morgan Stanley in New York, said in the report.
Japan Ratings
The yen tends to strengthen during economic and financial turmoil because while it has the world’s most debt, which is twice gross domestic product, the current-account surplus makes the country less reliant on foreign capital. The yen has risen even as Japan’s credit rating was cut on May 22 by Fitch Ratings, which cited the nation’s “leisurely” efforts to tackle its burden.
Yields on 10-year Japanese government bonds fell to 0.805 percent last week, the lowest since 2003, and stocks tumbled as Spain struggled to recapitalize its banks and after inconclusive Greek elections fueled bets the nation may quit the currency. Japan’s Topix Index (TPX) declined 1.8 percent, falling for a ninth week, the longest losing streak since September 1975.
The turmoil in Europe is taking its toll on the global economy, diminishing the odds that world leaders will move to help Japan weaken its currency at the expense of theirs through coordinated intervention in the foreign-exchange market.
U.S., China
The U.S. Labor Department reported job gains of 69,000 in May, the fewest in a year, and said the unemployment rate rose to 8.2 percent from 8.1 percent in April. Commerce Department figures a day earlier showed the economy expanded at a 1.9 percent annual rate last quarter, less than a 2.2 percent previous estimate.
Manufacturing in China grew last month at the slowest pace this year, trailing 26 of 27 estimates in a Bloomberg survey, according to an index published by the nation’s statistics bureau and logistics federation.
“With the ongoing concerns about Europe, Greek elections and Spanish banking sector, we’re seeing the yen benefit from the safe-haven flows,” Sue Trinh, a Hong-Kong based senior foreign-exchange strategist at Royal Bank of Canada, said in a telephone interview May 30. “The goal of Japanese officials is to manage the pace of appreciation in the yen and not try to engineer its outright weakness.”
Yen Forecasts
RBC, the most accurate yen-dollar forecaster in a first- quarter survey by Bloomberg News, predicts the Japanese currency will appreciate to 73 per dollar and 93 per euro by year-end.
The yen will average 80 per dollar this quarter and 82 in the final three months of the year, according to the median estimate of more than 50 economists surveyed by Bloomberg. That’s stronger than predictions made at the end of March that it would weaken to 83 per dollar in the second quarter and about 85 in the fourth quarter.
The difference in the number of wagers by hedge funds and other large speculators on a drop in the yen against the dollar versus those on an advance -- so-called net shorts -- fell to 11,330 in the week ended May 29, from 67,622 on March 27, according to the Commodity Futures Trading Commission.
Japan refrained from selling yen in the month to May 29, the Ministry of Finance said on its website on May 31. It last sold the currency on Nov. 4 as Europe’s deepening crisis and slower global growth spurred the currency to a post-World War II high of 75.35 per dollar on Oct. 31.
‘Decisive Action’
While the yen immediately weakened to 79.53 that day, it began to slowly appreciate until reaching 76.03 on Feb. 1.
“We will continue to carefully monitor currency market moves with more caution,” Japanese Finance Minister Jun Azumi, 50, told reporters in Tokyo on June 1. “If these excessive moves continue, I think I must take decisive action.”
A day earlier, Shirakawa said events in Europe may dictate what happens in the foreign-exchange market.
“A large factor determining the foreign-exchange market is a valuation about how much risk global investors can take,” Shirakawa, 62, said in the Diet on May 31. “Whether the situation over the European debt problem is improving or worsening seems to be the big determinant factor.”
The central bank’s press office declined to comment on the yen in a phone call made by Bloomberg.
A stronger yen raises prices for exporters and reduced the value of their repatriated income. Every one-yen movement against the dollar leads to a 2.4 percent drop in operating profit at Nissan Motor Co. (7201) and 3.3 percent at Toyota Motor Corp., according to a Goldman Sachs Group Inc. report in April.
Manufacturers’ Estimates
Japan’s large manufacturers expected the currency to trade at an average rate of 78.14 in fiscal 2012, according to the BOJ’s Tankan quarterly survey released on April 2. That compares with an estimate of 79.02 for the fiscal year ending March 31, indicated in the survey released on Dec. 15.
Toyota, which makes 3 million vehicles in Japan, has announced plans to increase production in Indonesia, Russia and the U.S., while Nissan Chief Executive Officer Carlos Ghosn said on May 11 that the appreciating yen poses the biggest risk for his company’s performance this fiscal year.
Japanese exporters losing customers to overseas rivals are cutting labor costs. Panasonic Corp. (6752), the biggest employer among companies on the Tokyo Stock Exchange, said May 29 it may cut headquarters jobs after streamlining production units. Sony Corp. announced plans on April 12 to reduce its workforce by 10,000 after four straight years of losses. The company forecast profit on May 10 that was less than half of what analysts estimated.
No ‘Control’
Policy makers may be waiting until the current bout of risk aversion abates, according to Adrian Lee & Partners, which manages more than $5 billion from London and Dublin, according to its website.
“The BOJ realizes that the key factors driving the yen higher are beyond their control,” Adrian Lee, president and chief investment officer, said by telephone on May 31. “They are doing the best they can to slow its appreciation and may intervene when the market is on their side. There was a boost to growth from the temporary stimulus. That is now fading.”
A resurgent economy is also fueling the yen. Japan’s gross domestic product probably grew at a 4.5 percent annual pace in the first quarter, according to the median forecast of 10 economists surveyed by Bloomberg News. GDP grew at a 0.1 percent annual rate in the final quarter last year.
The probability of Japan intervening at the yen’s current level and pace of change is low, said Tomoya Masanao, head of money management for Japan at Pacific Investment Management Co., which runs the world’s biggest bond fund.
Yen selling last year wasn’t able to stop the currency’s appreciation, so “it’s hard to see intervention this time around would be able to change the market trend,” Masanao said in an interview on June 1 at a Euromoney conference in Tokyo.
Bank of Japan Governor Masaaki Shirakawa is being steamrolled by investors pushing the yen toward a post-World War II high against the dollar, negating his attempts to weaken the currency.
After depreciating 10.4 percent in the first quarter, the most since 1995, the yen is up 13.4 percent since March, the best among 10 developed-nation currencies, according to data compiled by Bloomberg. The rebound from an almost 10-month low reached March 21 is set to continue as the fallout from Europe’s debt crisis rattles markets from the U.S. to China, say an increasing number of investors and strategists from Tokyo to London and New York.
“All investors know that intervention will not stop the yen strength,” Yuuki Sakurai, chief executive officer at Fukoku Capital Management Inc. in Tokyo, which manages $7.3 billion of assets, said in a telephone interview on May 30. “Intervening at this stage would be unwise and a waste of money. As long as Europe remains in a state of confusion, yen will continue to be bought for its relative safety.”
Japan sold 14.3 trillion yen ($183.3 billion) last year, the third-most on record, Ministry of Finance data show, to slow its gains after the country was struck by an earthquake and the worst nuclear crisis in a generation. While officials said last week they are ready to take further action to prevent the yen’s strength from damaging Japan’s nascent economic recovery, currency traders pushed it to its biggest weekly gain of 2012. Hedge funds have cut bets it will weaken versus the dollar by 83 percent from an almost five-year high in March.
Exceeding 1995
The yen may rise to as much as 75 per dollar, Sakurai said. It ended June 1 at 78.02 per dollar, up about 2.1 percent on the week. Against the euro, it strengthened 2.8 percent to 97.01.
Japan’s currency is stronger now than the 80 per dollar level reached in 1995, when global coordinated intervention sent it tumbling to 147.66 over the next three years.
Even with the gains, the yen isn’t overvalued compared with 1995, according to strategists at New York-based Morgan Stanley. They said in a report dated May 31 that on a trade-weighted basis, the yen is “roughly” in line with its average over the past two decades and would need to appreciate to about 55 per dollar to equal its strength in the mid 1990s.
“The discrepancy between nominal and real valuation reflects improved Japanese competitiveness as a consequence of deflationary declines in domestic prices and wages,” Ronald Leven, an executive director and strategist at Morgan Stanley in New York, said in the report.
Japan Ratings
The yen tends to strengthen during economic and financial turmoil because while it has the world’s most debt, which is twice gross domestic product, the current-account surplus makes the country less reliant on foreign capital. The yen has risen even as Japan’s credit rating was cut on May 22 by Fitch Ratings, which cited the nation’s “leisurely” efforts to tackle its burden.
Yields on 10-year Japanese government bonds fell to 0.805 percent last week, the lowest since 2003, and stocks tumbled as Spain struggled to recapitalize its banks and after inconclusive Greek elections fueled bets the nation may quit the currency. Japan’s Topix Index (TPX) declined 1.8 percent, falling for a ninth week, the longest losing streak since September 1975.
The turmoil in Europe is taking its toll on the global economy, diminishing the odds that world leaders will move to help Japan weaken its currency at the expense of theirs through coordinated intervention in the foreign-exchange market.
U.S., China
The U.S. Labor Department reported job gains of 69,000 in May, the fewest in a year, and said the unemployment rate rose to 8.2 percent from 8.1 percent in April. Commerce Department figures a day earlier showed the economy expanded at a 1.9 percent annual rate last quarter, less than a 2.2 percent previous estimate.
Manufacturing in China grew last month at the slowest pace this year, trailing 26 of 27 estimates in a Bloomberg survey, according to an index published by the nation’s statistics bureau and logistics federation.
“With the ongoing concerns about Europe, Greek elections and Spanish banking sector, we’re seeing the yen benefit from the safe-haven flows,” Sue Trinh, a Hong-Kong based senior foreign-exchange strategist at Royal Bank of Canada, said in a telephone interview May 30. “The goal of Japanese officials is to manage the pace of appreciation in the yen and not try to engineer its outright weakness.”
Yen Forecasts
RBC, the most accurate yen-dollar forecaster in a first- quarter survey by Bloomberg News, predicts the Japanese currency will appreciate to 73 per dollar and 93 per euro by year-end.
The yen will average 80 per dollar this quarter and 82 in the final three months of the year, according to the median estimate of more than 50 economists surveyed by Bloomberg. That’s stronger than predictions made at the end of March that it would weaken to 83 per dollar in the second quarter and about 85 in the fourth quarter.
The difference in the number of wagers by hedge funds and other large speculators on a drop in the yen against the dollar versus those on an advance -- so-called net shorts -- fell to 11,330 in the week ended May 29, from 67,622 on March 27, according to the Commodity Futures Trading Commission.
Japan refrained from selling yen in the month to May 29, the Ministry of Finance said on its website on May 31. It last sold the currency on Nov. 4 as Europe’s deepening crisis and slower global growth spurred the currency to a post-World War II high of 75.35 per dollar on Oct. 31.
‘Decisive Action’
While the yen immediately weakened to 79.53 that day, it began to slowly appreciate until reaching 76.03 on Feb. 1.
“We will continue to carefully monitor currency market moves with more caution,” Japanese Finance Minister Jun Azumi, 50, told reporters in Tokyo on June 1. “If these excessive moves continue, I think I must take decisive action.”
A day earlier, Shirakawa said events in Europe may dictate what happens in the foreign-exchange market.
“A large factor determining the foreign-exchange market is a valuation about how much risk global investors can take,” Shirakawa, 62, said in the Diet on May 31. “Whether the situation over the European debt problem is improving or worsening seems to be the big determinant factor.”
The central bank’s press office declined to comment on the yen in a phone call made by Bloomberg.
A stronger yen raises prices for exporters and reduced the value of their repatriated income. Every one-yen movement against the dollar leads to a 2.4 percent drop in operating profit at Nissan Motor Co. (7201) and 3.3 percent at Toyota Motor Corp., according to a Goldman Sachs Group Inc. report in April.
Manufacturers’ Estimates
Japan’s large manufacturers expected the currency to trade at an average rate of 78.14 in fiscal 2012, according to the BOJ’s Tankan quarterly survey released on April 2. That compares with an estimate of 79.02 for the fiscal year ending March 31, indicated in the survey released on Dec. 15.
Toyota, which makes 3 million vehicles in Japan, has announced plans to increase production in Indonesia, Russia and the U.S., while Nissan Chief Executive Officer Carlos Ghosn said on May 11 that the appreciating yen poses the biggest risk for his company’s performance this fiscal year.
Japanese exporters losing customers to overseas rivals are cutting labor costs. Panasonic Corp. (6752), the biggest employer among companies on the Tokyo Stock Exchange, said May 29 it may cut headquarters jobs after streamlining production units. Sony Corp. announced plans on April 12 to reduce its workforce by 10,000 after four straight years of losses. The company forecast profit on May 10 that was less than half of what analysts estimated.
No ‘Control’
Policy makers may be waiting until the current bout of risk aversion abates, according to Adrian Lee & Partners, which manages more than $5 billion from London and Dublin, according to its website.
“The BOJ realizes that the key factors driving the yen higher are beyond their control,” Adrian Lee, president and chief investment officer, said by telephone on May 31. “They are doing the best they can to slow its appreciation and may intervene when the market is on their side. There was a boost to growth from the temporary stimulus. That is now fading.”
A resurgent economy is also fueling the yen. Japan’s gross domestic product probably grew at a 4.5 percent annual pace in the first quarter, according to the median forecast of 10 economists surveyed by Bloomberg News. GDP grew at a 0.1 percent annual rate in the final quarter last year.
The probability of Japan intervening at the yen’s current level and pace of change is low, said Tomoya Masanao, head of money management for Japan at Pacific Investment Management Co., which runs the world’s biggest bond fund.
Yen selling last year wasn’t able to stop the currency’s appreciation, so “it’s hard to see intervention this time around would be able to change the market trend,” Masanao said in an interview on June 1 at a Euromoney conference in Tokyo.
Dollar Is Near Week-Low Before Bernanke Speaks on Economy
The dollar was within 0.1 percent of a more than one-week low against the euro on bets Federal Reserve Chairman Ben S. Bernanke today may signal more stimulus is needed to spur a recovery in the world’s largest economy.
The yen declined versus most of its 16 major counterparts as Asian stocks extended a global rally, damping demand for lower-yielding currencies. The euro remained higher after its biggest gain in three months against the greenback yesterday amid speculation the European Central Bank will act to rein in the region’s debt crisis after leaving benchmark interest rates at a record low.
“The U.S. dollar is certainly susceptible to indications that the Fed is looking at QE3, considering that long positions have been built up to near-record levels,” Mike Jones, a Wellington-based currency strategist at Bank of New Zealand Ltd, said referring to a third round of debt purchases known as quantitative easing. “It’s the rhetoric that really matters for markets.”
The dollar traded at $1.2572 per euro as of 9:12 a.m. in Tokyo from $1.2582 at the close in New York yesterday, when it sank 1 percent and touched $1.2586, the weakest since May 28. The U.S. currency added 0.2 percent to 79.32 yen. The 17-nation euro rose 0.1 percent to 99.73 yen.
The MSCI Asia Pacific Index of shares gained 1 percent. The Standard & Poor’s 500 Index (SPX) climbed 2.3 percent yesterday, while the MSCI World Index rose 2.2 percent.
Bernanke Testimony
Bernanke will testify to U.S. lawmakers in Washington today. He said in April the Fed may provide more easing should unemployment fail to make “sufficient progress towards its longer-run normal level.”
Fed Vice Chairman Janet Yellen said yesterday in Boston slowing job growth and deteriorating financial-market conditions show the U.S. economy “remains vulnerable to setbacks” and may warrant additional monetary stimulus.
The policy-setting Federal Open Market Committee meets June 19-20 to consider whether to add to its record easing after the economy created the fewest jobs in a year in May. Two regional Fed bank presidents who vote on policy this year, San Francisco’s John Williams and Atlanta’s Dennis Lockhart, said yesterday the central bank should be prepared to take action if the economy deteriorates further.
The central bank’s Beige Book business survey showed yesterday that the U.S. economy maintained a moderate pace of growth as factory output rose and the real-estate market improved.
The ECB’s decision to leave its key rate at 1 percent yesterday was predicted by 49 of 60 economists surveyed by Bloomberg News. Ten forecast a quarter-point reduction, and one a half-point cut.
“We monitor all developments closely and we stand ready to act,” ECB President Mario Draghi told reporters in Frankfurt. Downside risks to the economic outlook have increased and “a few” of the ECB’s Governing Council members called for a rate cut at the meeting, he said.
The dollar was within 0.1 percent of a more than one-week low against the euro on bets Federal Reserve Chairman Ben S. Bernanke today may signal more stimulus is needed to spur a recovery in the world’s largest economy.
The yen declined versus most of its 16 major counterparts as Asian stocks extended a global rally, damping demand for lower-yielding currencies. The euro remained higher after its biggest gain in three months against the greenback yesterday amid speculation the European Central Bank will act to rein in the region’s debt crisis after leaving benchmark interest rates at a record low.
“The U.S. dollar is certainly susceptible to indications that the Fed is looking at QE3, considering that long positions have been built up to near-record levels,” Mike Jones, a Wellington-based currency strategist at Bank of New Zealand Ltd, said referring to a third round of debt purchases known as quantitative easing. “It’s the rhetoric that really matters for markets.”
The dollar traded at $1.2572 per euro as of 9:12 a.m. in Tokyo from $1.2582 at the close in New York yesterday, when it sank 1 percent and touched $1.2586, the weakest since May 28. The U.S. currency added 0.2 percent to 79.32 yen. The 17-nation euro rose 0.1 percent to 99.73 yen.
The MSCI Asia Pacific Index of shares gained 1 percent. The Standard & Poor’s 500 Index (SPX) climbed 2.3 percent yesterday, while the MSCI World Index rose 2.2 percent.
Bernanke Testimony
Bernanke will testify to U.S. lawmakers in Washington today. He said in April the Fed may provide more easing should unemployment fail to make “sufficient progress towards its longer-run normal level.”
Fed Vice Chairman Janet Yellen said yesterday in Boston slowing job growth and deteriorating financial-market conditions show the U.S. economy “remains vulnerable to setbacks” and may warrant additional monetary stimulus.
The policy-setting Federal Open Market Committee meets June 19-20 to consider whether to add to its record easing after the economy created the fewest jobs in a year in May. Two regional Fed bank presidents who vote on policy this year, San Francisco’s John Williams and Atlanta’s Dennis Lockhart, said yesterday the central bank should be prepared to take action if the economy deteriorates further.
The central bank’s Beige Book business survey showed yesterday that the U.S. economy maintained a moderate pace of growth as factory output rose and the real-estate market improved.
The ECB’s decision to leave its key rate at 1 percent yesterday was predicted by 49 of 60 economists surveyed by Bloomberg News. Ten forecast a quarter-point reduction, and one a half-point cut.
“We monitor all developments closely and we stand ready to act,” ECB President Mario Draghi told reporters in Frankfurt. Downside risks to the economic outlook have increased and “a few” of the ECB’s Governing Council members called for a rate cut at the meeting, he said.
Baht nears two-week high
Thailand's baht advanced toward its strongest level in two weeks and government bonds fell after policy makers from the world's leading economies agreed to coordinate their response to Europe's financial crisis.
The Bloomberg-JPMorgan Asia Dollar Index climbed the most in eight weeks and the MSCI Asia-Pacific Index of shares rose after Japanese Finance Minister Jun Azumi said on Tuesday that officials from the Group of Seven nations will work together to help put the public finances of Spain and Greece on a sustainable footing.
"Coordinated support will help stabilise the situation in Europe," said Hideki Hayashi, a researcher at the Japan Centre for Economic Research in Tokyo. "That is leading to better sentiment in emerging-market stocks and currencies. However, this will be only temporary as the debt problem still persists."
The baht on Wednesday appreciated 0.6 per cent to 31.44 per US dollar, according to data compiled by Bloomberg. The currency reached 31.43 on Tuesday, the strongest level since May 23. One-month implied volatility, a measure of exchange-rate swings used to price options, was unchanged at 4.52 per cent.
The yield on the 3.25 per cent bonds due June 2017 rose two basis points, or 0.02 percentage point, to 3.41 per cent, according to data compiled by Bloomberg.
Thailand's baht advanced toward its strongest level in two weeks and government bonds fell after policy makers from the world's leading economies agreed to coordinate their response to Europe's financial crisis.
The Bloomberg-JPMorgan Asia Dollar Index climbed the most in eight weeks and the MSCI Asia-Pacific Index of shares rose after Japanese Finance Minister Jun Azumi said on Tuesday that officials from the Group of Seven nations will work together to help put the public finances of Spain and Greece on a sustainable footing.
"Coordinated support will help stabilise the situation in Europe," said Hideki Hayashi, a researcher at the Japan Centre for Economic Research in Tokyo. "That is leading to better sentiment in emerging-market stocks and currencies. However, this will be only temporary as the debt problem still persists."
The baht on Wednesday appreciated 0.6 per cent to 31.44 per US dollar, according to data compiled by Bloomberg. The currency reached 31.43 on Tuesday, the strongest level since May 23. One-month implied volatility, a measure of exchange-rate swings used to price options, was unchanged at 4.52 per cent.
The yield on the 3.25 per cent bonds due June 2017 rose two basis points, or 0.02 percentage point, to 3.41 per cent, according to data compiled by Bloomberg.
Pound Strengthens as BOE Keeps Stimulus on Hold; Gilts Decline
The pound strengthened to a one-week high against the dollar and gilts fell after the Bank of England kept its stimulus program unchanged and China cut borrowing costs to boost growth.
Sterling rose versus all except one of its 16 major counterparts after a report showed U.K. services grew more in May than analysts forecast. Policy makers held the bond-purchase program at 325 billion pounds ($505 billion) and their benchmark rate at a record-low 0.5 percent. The decision to refrain from increasing stimulus was predicted by 37 of 42 economists surveyed by Bloomberg News. Citigroup Inc., Deutsche Bank AG, and Morgan Stanley were among banks that forecast an expansion.
“The BOE decided not to move and sterling’s rise is reflecting that,” said Gavin Friend, a markets strategist at National Australia Bank Ltd. (NAB) in London. “Playing across this is the China move to spur their economy and that’s generally supportive to risk assets.”
The pound advanced 0.3 percent to $1.5549 at 4:35 p.m. London time after rising to $1.5601, the strongest level since May 30. Sterling gained 0.6 percent to 80.70 pence per euro, and appreciated 0.9 percent to 123.86 yen.
China cut interest rates for the first time since 2008, lowering the one-year deposit rate to 3.25 percent from 3.5 percent effective tomorrow, the People’s Bank of China said on its website. The one-year lending rate will fall to 6.31 percent from 6.56 percent.
Services Expand
The U.K. services gauge based on a survey of purchasing managers held at 53.3 from April, Markit Economics and the Chartered Institute of Purchasing and Supply said in London. Economists surveyed by Bloomberg News forecast a decline to 52.4. A reading above 50 indicates expansion.
Sterling has gained 2 percent this year, the best performer among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes, as investors fleeing the fiscal turmoil in the euro bloc purchased U.K. assets as a haven. The dollar rose 1.9 percent, and the euro dropped 1.7 percent.
“The pound may try and break higher,” Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, said before the BOE decision. “Any relief will only be temporary for the pound, because expectations will shift to the next meeting. We still think the pound remains under downward pressure because the U.K. economy will weaken.”
The 10-year gilt yield rose six basis points, or 0.06 percentage point, to 1.72 percent. The 4 percent bond due March 2022 fell 0.615, or 6.15 pounds per 1,000-pound face amount, to 120.335. The yield declined to a record 1.439 percent on June 1.
ECB Ready
European Central Bank President Mario Draghi said yesterday officials stand ready to act as the growth outlook worsens in the euro area, Britain’s biggest trading partner. While the ECB left its benchmark rate at 1 percent, Draghi said “a few” governing council members sought a cut.
In addition to the threats to the U.K. from the euro area, Prime Minister David Cameron’s fiscal squeeze is also weighing on Britain’s economy. The International Monetary Fund said on May 22 the U.K. may require further stimulus “via further QE and possibly cutting the policy rate.”
Cameron today called on the euro-region to step up efforts to contain the sovereign debt crisis.
“The first priority is to stabilize the financial situation,” the prime minister said in Norway. “That means recapitalization of banks, it means building of firewalls, it means reassuring markets.”
Gilts have returned 2.8 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds rose 3.8 percent, and U.S. Treasuries gained 1.7 percent.
The pound strengthened to a one-week high against the dollar and gilts fell after the Bank of England kept its stimulus program unchanged and China cut borrowing costs to boost growth.
Sterling rose versus all except one of its 16 major counterparts after a report showed U.K. services grew more in May than analysts forecast. Policy makers held the bond-purchase program at 325 billion pounds ($505 billion) and their benchmark rate at a record-low 0.5 percent. The decision to refrain from increasing stimulus was predicted by 37 of 42 economists surveyed by Bloomberg News. Citigroup Inc., Deutsche Bank AG, and Morgan Stanley were among banks that forecast an expansion.
“The BOE decided not to move and sterling’s rise is reflecting that,” said Gavin Friend, a markets strategist at National Australia Bank Ltd. (NAB) in London. “Playing across this is the China move to spur their economy and that’s generally supportive to risk assets.”
The pound advanced 0.3 percent to $1.5549 at 4:35 p.m. London time after rising to $1.5601, the strongest level since May 30. Sterling gained 0.6 percent to 80.70 pence per euro, and appreciated 0.9 percent to 123.86 yen.
China cut interest rates for the first time since 2008, lowering the one-year deposit rate to 3.25 percent from 3.5 percent effective tomorrow, the People’s Bank of China said on its website. The one-year lending rate will fall to 6.31 percent from 6.56 percent.
Services Expand
The U.K. services gauge based on a survey of purchasing managers held at 53.3 from April, Markit Economics and the Chartered Institute of Purchasing and Supply said in London. Economists surveyed by Bloomberg News forecast a decline to 52.4. A reading above 50 indicates expansion.
Sterling has gained 2 percent this year, the best performer among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes, as investors fleeing the fiscal turmoil in the euro bloc purchased U.K. assets as a haven. The dollar rose 1.9 percent, and the euro dropped 1.7 percent.
“The pound may try and break higher,” Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, said before the BOE decision. “Any relief will only be temporary for the pound, because expectations will shift to the next meeting. We still think the pound remains under downward pressure because the U.K. economy will weaken.”
The 10-year gilt yield rose six basis points, or 0.06 percentage point, to 1.72 percent. The 4 percent bond due March 2022 fell 0.615, or 6.15 pounds per 1,000-pound face amount, to 120.335. The yield declined to a record 1.439 percent on June 1.
ECB Ready
European Central Bank President Mario Draghi said yesterday officials stand ready to act as the growth outlook worsens in the euro area, Britain’s biggest trading partner. While the ECB left its benchmark rate at 1 percent, Draghi said “a few” governing council members sought a cut.
In addition to the threats to the U.K. from the euro area, Prime Minister David Cameron’s fiscal squeeze is also weighing on Britain’s economy. The International Monetary Fund said on May 22 the U.K. may require further stimulus “via further QE and possibly cutting the policy rate.”
Cameron today called on the euro-region to step up efforts to contain the sovereign debt crisis.
“The first priority is to stabilize the financial situation,” the prime minister said in Norway. “That means recapitalization of banks, it means building of firewalls, it means reassuring markets.”
Gilts have returned 2.8 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds rose 3.8 percent, and U.S. Treasuries gained 1.7 percent.
Dollar Set for Weekly Drop Before U.S. Output, Confidence Data
The dollar was set for weekly declines against most major peers before U.S. data that may show production slowed and consumer confidence fell, adding to the case for further monetary stimulus by the Federal Reserve.
The euro remained higher versus the yen following a three- day advance amid speculation traders are trimming bearish bets against the common currency before Greece holds general elections on June 17. The Bank of Japan (8301) will conclude a two-day policy meeting today.
“U.S. economic indicators and the European situation have been deteriorating rapidly in recent months,” said Kengo Suzuki, a foreign-exchange strategist in Tokyo at Mizuho Securities Co., a unit of Japan’s third-largest bank by market value. “The market is pressing the Fed to take action. Their accommodative stance is likely to lead to a lower dollar.”
The dollar traded at $1.2618 per euro as of 9:46 a.m. in Tokyo from the close in New York yesterday when it slid 0.6 percent to $1.2633. It has fallen 0.8 percent this week, set for the biggest drop since April 20. The 17-nation euro was at 100.27 yen, following a 1.1 percent gain in the past three days to 100.24. The yen fell 0.2 percent to 79.47 per dollar.
U.S. data due today are projected to show the recovery in the world’s largest economy is losing momentum. Growth in industrial production probably slowed to 0.1 percent last month from 1.1 percent in April, according to the median estimate of economists surveyed by Bloomberg News.
A gauge of manufacturing in the New York region is estimated to have fallen to 13 in June from 17.1 in May, a separate survey showed. The Thomson Reuters/University of Michigan preliminary index of sentiment declined to 77.5 this month from 79.3 in May, the highest since October 2007, economists forecast.
Fed Action
“The situation in Europe poses significant risks to the U.S. financial system and economy and must be monitored closely,” Fed Chairman Ben S. Bernanke told lawmakers on June 7. “As always, the Federal Reserve remains prepared to take action as needed to protect the U.S. financial system and economy in the event that financial stresses escalate.”
The Fed bought $2.3 trillion of bonds in two rounds of so- called quantitative easing from 2008 through 2011 to stimulate the economy through lower borrowing costs. The central bank meets on June 19 and 20.
Hedge funds and other large speculators increased their bets on a drop in the euro against the dollar to a record high of 214,418 last week, figures released June 8 by the Washington- based Commodity Futures Trading Commission showed.
‘Big’ Event
Almost 10 million Greeks will vote for the second time in six weeks after a May 6 ballot failed to yield a government. The final polls, published on June 1, showed no party set to win a majority. Exit polls will be released when voting ends at 7 p.m. in Athens, with a first official result estimate due around 9:30 p.m.
The elections may determine whether Greece upholds austerity conditions attached to international aid, tries to renegotiate the terms or abandons the pledge and risks what would be the first departure from the euro bloc. Spain on June 9 became the fourth euro member to request a bailout.
“Because the event this weekend is very big and people have been shorting the euro, they are adjusting their positions” ahead of the elections, said Kazuo Shirai, a trader at Union Bank NA in Los Angeles. “Sooner or later, I expect the euro to weaken.”
Demand for the euro was also damped after Moody’s Investors Service downgraded five Dutch banking groups. The outlook on most of the groups ratings are now stable, Moody’s said in a statement dated today.
Central Banks
Central banks of major economies are preparing for coordinated action to provide liquidity if needed after the Greek voting, Reuters reported, citing officials linked to Group of 20 nations. G-20 policy makers are due to meet June 18-19.
BOJ Governor Masaaki Shirakawa and his board will probably keep unchanged a 40 trillion-yen ($503 billion) fund to buy assets such as government bonds and stock funds, according to all 13 analysts surveyed by Bloomberg News. Six of the analysts said the BOJ may ease monetary policy in July, when the board reviews its price and economic forecasts.
“Expectations of more Fed easing as soon as next week and euro zone stress may drive the BOJ to undertake yet another round of balance sheet expansion,” analysts at BNP Paribas SA, including Steven Saywell, head of foreign-exchange strategy for Europe, wrote in a research note today. Japan’s Ministry of Finance “has clearly stated its discomfort with yen strength and political pressure may lead the BOJ to try and stem yen appreciation,” according to the report.
The dollar was set for weekly declines against most major peers before U.S. data that may show production slowed and consumer confidence fell, adding to the case for further monetary stimulus by the Federal Reserve.
The euro remained higher versus the yen following a three- day advance amid speculation traders are trimming bearish bets against the common currency before Greece holds general elections on June 17. The Bank of Japan (8301) will conclude a two-day policy meeting today.
“U.S. economic indicators and the European situation have been deteriorating rapidly in recent months,” said Kengo Suzuki, a foreign-exchange strategist in Tokyo at Mizuho Securities Co., a unit of Japan’s third-largest bank by market value. “The market is pressing the Fed to take action. Their accommodative stance is likely to lead to a lower dollar.”
The dollar traded at $1.2618 per euro as of 9:46 a.m. in Tokyo from the close in New York yesterday when it slid 0.6 percent to $1.2633. It has fallen 0.8 percent this week, set for the biggest drop since April 20. The 17-nation euro was at 100.27 yen, following a 1.1 percent gain in the past three days to 100.24. The yen fell 0.2 percent to 79.47 per dollar.
U.S. data due today are projected to show the recovery in the world’s largest economy is losing momentum. Growth in industrial production probably slowed to 0.1 percent last month from 1.1 percent in April, according to the median estimate of economists surveyed by Bloomberg News.
A gauge of manufacturing in the New York region is estimated to have fallen to 13 in June from 17.1 in May, a separate survey showed. The Thomson Reuters/University of Michigan preliminary index of sentiment declined to 77.5 this month from 79.3 in May, the highest since October 2007, economists forecast.
Fed Action
“The situation in Europe poses significant risks to the U.S. financial system and economy and must be monitored closely,” Fed Chairman Ben S. Bernanke told lawmakers on June 7. “As always, the Federal Reserve remains prepared to take action as needed to protect the U.S. financial system and economy in the event that financial stresses escalate.”
The Fed bought $2.3 trillion of bonds in two rounds of so- called quantitative easing from 2008 through 2011 to stimulate the economy through lower borrowing costs. The central bank meets on June 19 and 20.
Hedge funds and other large speculators increased their bets on a drop in the euro against the dollar to a record high of 214,418 last week, figures released June 8 by the Washington- based Commodity Futures Trading Commission showed.
‘Big’ Event
Almost 10 million Greeks will vote for the second time in six weeks after a May 6 ballot failed to yield a government. The final polls, published on June 1, showed no party set to win a majority. Exit polls will be released when voting ends at 7 p.m. in Athens, with a first official result estimate due around 9:30 p.m.
The elections may determine whether Greece upholds austerity conditions attached to international aid, tries to renegotiate the terms or abandons the pledge and risks what would be the first departure from the euro bloc. Spain on June 9 became the fourth euro member to request a bailout.
“Because the event this weekend is very big and people have been shorting the euro, they are adjusting their positions” ahead of the elections, said Kazuo Shirai, a trader at Union Bank NA in Los Angeles. “Sooner or later, I expect the euro to weaken.”
Demand for the euro was also damped after Moody’s Investors Service downgraded five Dutch banking groups. The outlook on most of the groups ratings are now stable, Moody’s said in a statement dated today.
Central Banks
Central banks of major economies are preparing for coordinated action to provide liquidity if needed after the Greek voting, Reuters reported, citing officials linked to Group of 20 nations. G-20 policy makers are due to meet June 18-19.
BOJ Governor Masaaki Shirakawa and his board will probably keep unchanged a 40 trillion-yen ($503 billion) fund to buy assets such as government bonds and stock funds, according to all 13 analysts surveyed by Bloomberg News. Six of the analysts said the BOJ may ease monetary policy in July, when the board reviews its price and economic forecasts.
“Expectations of more Fed easing as soon as next week and euro zone stress may drive the BOJ to undertake yet another round of balance sheet expansion,” analysts at BNP Paribas SA, including Steven Saywell, head of foreign-exchange strategy for Europe, wrote in a research note today. Japan’s Ministry of Finance “has clearly stated its discomfort with yen strength and political pressure may lead the BOJ to try and stem yen appreciation,” according to the report.
Dollar Slides Before Fed Meeting on Easing Speculation
The dollar slid against the euro and yen before the Federal Reserve begins a meeting today amid prospects policy makers will consider taking further steps to spur growth in the U.S. economy.
The Japanese currency gained versus most of its 16 major counterparts as Group of 20 leaders meet in Mexico for a second day to discuss Europe’s debt crisis that has spurred investor demand for refuge assets. Spain’s borrowing costs soared to a euro-era record yesterday before the nation sells bills today. Australia’s dollar halted a three-day advance before the Reserve Bank releases minutes of its June meeting when it cut interest rates for a second-straight month.
“There are some expectations that the Fed may extend the Twist program,” Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore, said about the central bank’s operations to lengthen the maturity of its Treasury holdings in a bid to lower borrowing costs. “The Fed may also give some indication that they may do something in the later part of the year. The dollar will come under pressure.”
The dollar declined 0.2 percent to $1.2595 per euro at 10:11 a.m. in Tokyo from yesterday, when it touched $1.2748, the lowest level since May 22. The greenback dropped 0.1 percent to 79 yen. Japan’s currency fetched 99.51 per euro from 99.49. The so-called Aussie bought $1.0120 from $1.0124 yesterday, when it capped a three-day gain of 1.9 percent.
Fed policy makers will bring new forecasts to their two-day meeting starting today and probably will mark down their April central tendency estimate for growth of 2.4 percent to 2.9 percent this year. They will also contend with continuing financial stress in Europe and a U.S. unemployment rate that has remained above 8 percent for 40-consecutive months.
’Risk Management’
All this could prompt them to move away from their outlook for moderate growth and tilt toward a “risk-management” strategy pioneered by former Fed Chairman Alan Greenspan, which puts more emphasis on tracking and containing high-cost threats. Both Janet Yellen, the Fed’s vice chairman, and William C. Dudley, head of the Federal Reserve Bank of New York, used the phrase in the past month.
That insurance may come in the form of extending Operation Twist -- which JPMorgan Chase & Co. and Jefferies & Co. predict -- or an even more aggressive response if Fed officials see high costs in a slowdown of U.S. growth. The $400 billion program, which was announced in September and ends this month, involves selling short-term debt and buying longer-term bonds.
Quantitative Easing
The Fed bought $2.3 trillion of bonds in two rounds of so- called quantitative easing, or QE, from December 2008 to June 2011, seeking to cap borrowing costs and stimulate the economy. The Dollar Index (DXY), which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, tumbled 14 percent during that period. The gauge was at 81.838 today, after yesterday touching 81.161, the lowest since May 22.
G-20 chiefs are in Los Cabos, Mexico for a second consecutive summit to be dominated by the crisis in the euro bloc. With Greek elections over the weekend failing to damp the threat of contagion, policy makers are discussing ways to stimulate the world economy if necessary, a Canadian official said.
The crisis escalated on June 9 when Spain asked for a bailout of as much as 100 billion euros ($126 billion) to prop up its banks, becoming the fourth member of the currency union to request international aid.
Spanish 10-year yields yesterday jumped as much as 41 basis points to 7.29 percent, the most since the euro was introduced in 1999 and above the 7 percent level that pushed Greece, Ireland and Portugal to seek rescue packages. Spain is set to auction 12- and 18-month bills today, followed by an offering of bonds on June 21.
The dollar slid against the euro and yen before the Federal Reserve begins a meeting today amid prospects policy makers will consider taking further steps to spur growth in the U.S. economy.
The Japanese currency gained versus most of its 16 major counterparts as Group of 20 leaders meet in Mexico for a second day to discuss Europe’s debt crisis that has spurred investor demand for refuge assets. Spain’s borrowing costs soared to a euro-era record yesterday before the nation sells bills today. Australia’s dollar halted a three-day advance before the Reserve Bank releases minutes of its June meeting when it cut interest rates for a second-straight month.
“There are some expectations that the Fed may extend the Twist program,” Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore, said about the central bank’s operations to lengthen the maturity of its Treasury holdings in a bid to lower borrowing costs. “The Fed may also give some indication that they may do something in the later part of the year. The dollar will come under pressure.”
The dollar declined 0.2 percent to $1.2595 per euro at 10:11 a.m. in Tokyo from yesterday, when it touched $1.2748, the lowest level since May 22. The greenback dropped 0.1 percent to 79 yen. Japan’s currency fetched 99.51 per euro from 99.49. The so-called Aussie bought $1.0120 from $1.0124 yesterday, when it capped a three-day gain of 1.9 percent.
Fed policy makers will bring new forecasts to their two-day meeting starting today and probably will mark down their April central tendency estimate for growth of 2.4 percent to 2.9 percent this year. They will also contend with continuing financial stress in Europe and a U.S. unemployment rate that has remained above 8 percent for 40-consecutive months.
’Risk Management’
All this could prompt them to move away from their outlook for moderate growth and tilt toward a “risk-management” strategy pioneered by former Fed Chairman Alan Greenspan, which puts more emphasis on tracking and containing high-cost threats. Both Janet Yellen, the Fed’s vice chairman, and William C. Dudley, head of the Federal Reserve Bank of New York, used the phrase in the past month.
That insurance may come in the form of extending Operation Twist -- which JPMorgan Chase & Co. and Jefferies & Co. predict -- or an even more aggressive response if Fed officials see high costs in a slowdown of U.S. growth. The $400 billion program, which was announced in September and ends this month, involves selling short-term debt and buying longer-term bonds.
Quantitative Easing
The Fed bought $2.3 trillion of bonds in two rounds of so- called quantitative easing, or QE, from December 2008 to June 2011, seeking to cap borrowing costs and stimulate the economy. The Dollar Index (DXY), which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, tumbled 14 percent during that period. The gauge was at 81.838 today, after yesterday touching 81.161, the lowest since May 22.
G-20 chiefs are in Los Cabos, Mexico for a second consecutive summit to be dominated by the crisis in the euro bloc. With Greek elections over the weekend failing to damp the threat of contagion, policy makers are discussing ways to stimulate the world economy if necessary, a Canadian official said.
The crisis escalated on June 9 when Spain asked for a bailout of as much as 100 billion euros ($126 billion) to prop up its banks, becoming the fourth member of the currency union to request international aid.
Spanish 10-year yields yesterday jumped as much as 41 basis points to 7.29 percent, the most since the euro was introduced in 1999 and above the 7 percent level that pushed Greece, Ireland and Portugal to seek rescue packages. Spain is set to auction 12- and 18-month bills today, followed by an offering of bonds on June 21.
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Euro Falls Before Spanish Sale Amid Debt Crisis Concern
The euro fell as Spain prepared to auction bonds today amid signs Europe’s debt crisis is blunting economic growth in the region.
The 17-nation snapped a two-day gain against the dollar and yen before a preliminary report today that may show European services and manufacturing contracted this month at the fastest pace in three years. Demand for the dollar was limited after the Federal Reserve said it stands ready to implement further stimulus.
“As long as Spain’s debt problem stays with us, my bearish view on the euro won’t change,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp. (8711), a currency-margin company. “Whether Spain can resolve its debt problem has yet to become clear, so anxieties continue to prevail.”
The 17-nation euro slid 0.3 percent to $1.26664 at 11:33 a.m. in Tokyo from yesterday, when it capped a two-day advance of 1 percent. It fell 0.2 percent to 100.83 yen, after gaining 1.6 percent over the previous two days. The U.S. currency added 0.1 percent to 79.62 yen.
Spain is scheduled to auction notes today maturing 2014, 2015 and 2017. Earlier this week in its first debt sale since becoming the fourth euro member to seek a bailout, Spain auctioned 12-month bills at an average yield of 5.074 percent, a record in Bloomberg data going back to 2004.
Spanish Yield
Spanish 10-year yields yesterday declined for a second day to 6.74 percent. The rates on June 18 reached 7.29 percent, the most in the euro era and above the 7 percent level that pushed Greece, Ireland and Portugal to seek rescue packages.
European finance ministers are set to meet in Luxembourg today to discuss the currency union’s financial woes. Meanwhile, economic data may show the crisis is weighing on company output and household sentiment.
London-based Markit Economics is due to release advance data based on surveys of purchasing managers in the services and manufacturing industries. Its composite index for the euro area probably dropped to 45.5 in June from 46 in May, according to the median of economist forecasts collected by Bloomberg News. A reading at that level would be the fifth in a row below the 50 level that separates contraction from expansion and would be the lowest since June 2009.
An index of household sentiment in the common currency region declined to minus 20 in June from negative 19.3 in May, the economists said before the European Commission in Brussels releases its initial estimate today.
ECB Pressure
“Flash euro-zone PMI releases today will likely restrain the euro,” Mitul Kotecha, head of global currency strategy in Hong Kong at Credit Agricole Corporate & Investment Bank, wrote in a research note today. “The data will put further pressure on the European Central Bank to cut interest rates.”
The ECB earlier this month held its benchmark interest rate at a record low of 1 percent, while President Mario Draghi said “a few” policy makers called for a cut. Policy makers will meet next time on July 5.
The euro is down from this year’s high of $1.3487 on Feb. 24 and has depreciated about 6.7 percent in the past 12 months, according to Bloomberg Correlation-Weighted Indexes that measure 10 developed-market currencies.
The Fed said yesterday it will expand its so-called Operation Twist program, which seeks to lower borrowing costs by extending the average maturity of the securities in the central bank’s portfolio, by $267 billion through the end of the year. Central bank officials also cut their estimates for 2012 growth after last month’s slowdown in hiring and see little progress on unemployment during the rest of the year.
‘Additional Steps’
“If we don’t see continued improvement in the labor market, we’ll be prepared to take additional steps if appropriate,” Fed Chairman Ben S. Bernanke said at a news conference in Washington yesterday following a two-day meeting of the Federal Open Market Committee. “Additional asset purchases would be among the things that we would certainly consider.”
The Fed Bank of Philadelphia’s general economic index was at zero this month, according to the median economist estimate in a Bloomberg survey before data due today. The reading was minus 5.8 in May, the lowest since September and signaling contraction.
“The slowdown in the U.S. economy is more than I have expected, and it’s damping people’s willingness to buy the dollar,” said FX Prime’s Ueda.
N.Z. Economy
New Zealand’s dollar rose initially after a report showed the nation’s economy grew at the fastest pace in five years last quarter. Gross domestic product rose 1.1 percent in the three months ended March 31 from the previous quarter, when it expanded a revised 0.4 percent, Statistics New Zealand said.
The so-called kiwi climbed as much as 0.7 percent to 80.17 U.S. cents, the highest level since May 4. It pared gains after preliminary data showed China’s manufacturing may shrink for an eighth month in June.
The 48.1 advance reading for a purchasing managers’ index for China released by HSBC Holdings Plc and Markit Economics today compares with a final 48.4 for May. A reading above 50 indicates expansion.
The euro fell as Spain prepared to auction bonds today amid signs Europe’s debt crisis is blunting economic growth in the region.
The 17-nation snapped a two-day gain against the dollar and yen before a preliminary report today that may show European services and manufacturing contracted this month at the fastest pace in three years. Demand for the dollar was limited after the Federal Reserve said it stands ready to implement further stimulus.
“As long as Spain’s debt problem stays with us, my bearish view on the euro won’t change,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp. (8711), a currency-margin company. “Whether Spain can resolve its debt problem has yet to become clear, so anxieties continue to prevail.”
The 17-nation euro slid 0.3 percent to $1.26664 at 11:33 a.m. in Tokyo from yesterday, when it capped a two-day advance of 1 percent. It fell 0.2 percent to 100.83 yen, after gaining 1.6 percent over the previous two days. The U.S. currency added 0.1 percent to 79.62 yen.
Spain is scheduled to auction notes today maturing 2014, 2015 and 2017. Earlier this week in its first debt sale since becoming the fourth euro member to seek a bailout, Spain auctioned 12-month bills at an average yield of 5.074 percent, a record in Bloomberg data going back to 2004.
Spanish Yield
Spanish 10-year yields yesterday declined for a second day to 6.74 percent. The rates on June 18 reached 7.29 percent, the most in the euro era and above the 7 percent level that pushed Greece, Ireland and Portugal to seek rescue packages.
European finance ministers are set to meet in Luxembourg today to discuss the currency union’s financial woes. Meanwhile, economic data may show the crisis is weighing on company output and household sentiment.
London-based Markit Economics is due to release advance data based on surveys of purchasing managers in the services and manufacturing industries. Its composite index for the euro area probably dropped to 45.5 in June from 46 in May, according to the median of economist forecasts collected by Bloomberg News. A reading at that level would be the fifth in a row below the 50 level that separates contraction from expansion and would be the lowest since June 2009.
An index of household sentiment in the common currency region declined to minus 20 in June from negative 19.3 in May, the economists said before the European Commission in Brussels releases its initial estimate today.
ECB Pressure
“Flash euro-zone PMI releases today will likely restrain the euro,” Mitul Kotecha, head of global currency strategy in Hong Kong at Credit Agricole Corporate & Investment Bank, wrote in a research note today. “The data will put further pressure on the European Central Bank to cut interest rates.”
The ECB earlier this month held its benchmark interest rate at a record low of 1 percent, while President Mario Draghi said “a few” policy makers called for a cut. Policy makers will meet next time on July 5.
The euro is down from this year’s high of $1.3487 on Feb. 24 and has depreciated about 6.7 percent in the past 12 months, according to Bloomberg Correlation-Weighted Indexes that measure 10 developed-market currencies.
The Fed said yesterday it will expand its so-called Operation Twist program, which seeks to lower borrowing costs by extending the average maturity of the securities in the central bank’s portfolio, by $267 billion through the end of the year. Central bank officials also cut their estimates for 2012 growth after last month’s slowdown in hiring and see little progress on unemployment during the rest of the year.
‘Additional Steps’
“If we don’t see continued improvement in the labor market, we’ll be prepared to take additional steps if appropriate,” Fed Chairman Ben S. Bernanke said at a news conference in Washington yesterday following a two-day meeting of the Federal Open Market Committee. “Additional asset purchases would be among the things that we would certainly consider.”
The Fed Bank of Philadelphia’s general economic index was at zero this month, according to the median economist estimate in a Bloomberg survey before data due today. The reading was minus 5.8 in May, the lowest since September and signaling contraction.
“The slowdown in the U.S. economy is more than I have expected, and it’s damping people’s willingness to buy the dollar,” said FX Prime’s Ueda.
N.Z. Economy
New Zealand’s dollar rose initially after a report showed the nation’s economy grew at the fastest pace in five years last quarter. Gross domestic product rose 1.1 percent in the three months ended March 31 from the previous quarter, when it expanded a revised 0.4 percent, Statistics New Zealand said.
The so-called kiwi climbed as much as 0.7 percent to 80.17 U.S. cents, the highest level since May 4. It pared gains after preliminary data showed China’s manufacturing may shrink for an eighth month in June.
The 48.1 advance reading for a purchasing managers’ index for China released by HSBC Holdings Plc and Markit Economics today compares with a final 48.4 for May. A reading above 50 indicates expansion.
Aussie, Kiwi Approach 7-Week Highs on Stimulus Prospects
The Australian and New Zealand dollars traded near the strongest levels in almost seven weeks amid speculation central banks globally will add to stimulus measures.
The Australian currency rallied yesterday after Federal Reserve Chairman Ben S. Bernanke said policy makers were prepared to take further action even after they expanded the central bank’s so-called Operation Twist program. The New Zealand dollar advanced after data showed economic growth accelerated. Demand for the currencies was limited before European finance ministers meet today amid concern the euro-area crisis will weigh on global growth.
“The U.S. dollar’s going to stay a little bit weak in the near term, particularly against the Aussie and kiwi,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia (CBA), the country’s biggest lender. The Fed’s move is likely to boost the South Pacific currencies, although they’re unlikely to experience “a big lift” due to the turmoil in Europe, he said.
The Australian dollar traded at $1.0188 as of 10:25 a.m. in Sydney from $1.0194 in New York yesterday, when it climbed as high as $1.0224, its strongest level since May 4. The New Zealand currency, known as the kiwi, added 0.4 percent to 79.95 U.S. cents. It earlier touched 80.17 cents, also the highest since May 4.
The MSCI Asia Pacific Index of shares advanced 0.1 percent.
Fed Stimulus
The Fed yesterday said it will prolong the program to extend the maturity of its asset holdings through the end of the year. The central bank will sell $267 billion of shorter-term securities and buy the same amount of longer-term debt in a bid to reduce borrowing costs. Bernanke said that “additional asset purchases would be among the things that we would certainly consider.”
Euro-area finance ministers are set to meet in Luxembourg to discuss the bloc’s financial woes. Italian Prime Minister Mario Monti will host a meeting with his German, French and Spanish counterparts tomorrow in Rome.
“The markets are very mixed and they’re waiting for the next installment of the news from Europe,” said Emma Lawson, a Sydney-based currency strategist at National Australia Bank Ltd. (NAB) Investors are also hoping that the Fed, the Bank of England and the Bank of Japan (8301) will implement further quantitative easing, she said.
N.Z. Growth
The Australian dollar has advanced 1.1 percent over the past week, the second-strongest performance among the 10 currencies tracked by Bloomberg Correlation-Weighted Indexes. The New Zealand dollar was the best performer, with a gain of 1.7 percent.
New Zealand’s economy grew at the fastest pace in five years last quarter as food manufacturing and farm production increased, a report today showed. Gross domestic product rose 1.1 percent in the three months ended March 31 from the previous quarter, when it expanded a revised 0.4 percent, Statistics New Zealand said.
The New Zealand recovery “looks like it’s gathering more momentum than people thought, and that’s going to keep the kiwi quite well supported,” said CBA’s Capurso.
Australian bonds fell today, pushing yields on the benchmark 10-year security up by six basis points, or 0.06 percentage point, to 3.19 percent. The rate on the 15-year note, the country’s longest maturity, climbed above the Reserve Bank of Australia’s cash rate target for the first time since May 8. The RBA’s this month cut its key rate to 3.5 percent from 3.75 percent.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, climbed 10 basis points to 2.82 percent.
The Australian and New Zealand dollars traded near the strongest levels in almost seven weeks amid speculation central banks globally will add to stimulus measures.
The Australian currency rallied yesterday after Federal Reserve Chairman Ben S. Bernanke said policy makers were prepared to take further action even after they expanded the central bank’s so-called Operation Twist program. The New Zealand dollar advanced after data showed economic growth accelerated. Demand for the currencies was limited before European finance ministers meet today amid concern the euro-area crisis will weigh on global growth.
“The U.S. dollar’s going to stay a little bit weak in the near term, particularly against the Aussie and kiwi,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia (CBA), the country’s biggest lender. The Fed’s move is likely to boost the South Pacific currencies, although they’re unlikely to experience “a big lift” due to the turmoil in Europe, he said.
The Australian dollar traded at $1.0188 as of 10:25 a.m. in Sydney from $1.0194 in New York yesterday, when it climbed as high as $1.0224, its strongest level since May 4. The New Zealand currency, known as the kiwi, added 0.4 percent to 79.95 U.S. cents. It earlier touched 80.17 cents, also the highest since May 4.
The MSCI Asia Pacific Index of shares advanced 0.1 percent.
Fed Stimulus
The Fed yesterday said it will prolong the program to extend the maturity of its asset holdings through the end of the year. The central bank will sell $267 billion of shorter-term securities and buy the same amount of longer-term debt in a bid to reduce borrowing costs. Bernanke said that “additional asset purchases would be among the things that we would certainly consider.”
Euro-area finance ministers are set to meet in Luxembourg to discuss the bloc’s financial woes. Italian Prime Minister Mario Monti will host a meeting with his German, French and Spanish counterparts tomorrow in Rome.
“The markets are very mixed and they’re waiting for the next installment of the news from Europe,” said Emma Lawson, a Sydney-based currency strategist at National Australia Bank Ltd. (NAB) Investors are also hoping that the Fed, the Bank of England and the Bank of Japan (8301) will implement further quantitative easing, she said.
N.Z. Growth
The Australian dollar has advanced 1.1 percent over the past week, the second-strongest performance among the 10 currencies tracked by Bloomberg Correlation-Weighted Indexes. The New Zealand dollar was the best performer, with a gain of 1.7 percent.
New Zealand’s economy grew at the fastest pace in five years last quarter as food manufacturing and farm production increased, a report today showed. Gross domestic product rose 1.1 percent in the three months ended March 31 from the previous quarter, when it expanded a revised 0.4 percent, Statistics New Zealand said.
The New Zealand recovery “looks like it’s gathering more momentum than people thought, and that’s going to keep the kiwi quite well supported,” said CBA’s Capurso.
Australian bonds fell today, pushing yields on the benchmark 10-year security up by six basis points, or 0.06 percentage point, to 3.19 percent. The rate on the 15-year note, the country’s longest maturity, climbed above the Reserve Bank of Australia’s cash rate target for the first time since May 8. The RBA’s this month cut its key rate to 3.5 percent from 3.75 percent.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, climbed 10 basis points to 2.82 percent.
Dollar Set for Weekly Gain Before German Confidence Index
The dollar headed for a weekly gain against most of its major peers before data today forecast to show German business confidence fell this month, adding to signs that global growth is slowing.
The yen strengthened versus the majority of its 16 most- traded counterparts as Asian stocks extended a worldwide slump in equities, boosting demand for haven assets. The euro maintained its biggest decline in six months against the greenback after Moody’s Investors Service lowered credit ratings on 15 global banks, adding to concern that Europe’s fiscal woes are imperiling the world’s financial system.
“Should global growth slow, that is likely to lead to buying of the dollar,” said Daisaku Ueno, a senior foreign- exchange and fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo, a unit of Japan’s biggest listed bank. “In an ugly contest, the euro is likely to get more votes than the dollar because of the difference in their economic situations and monetary policy.”
The dollar traded at $1.2560 per euro as of 10:13 a.m. in Tokyo from yesterday, when it climbed 1.3 percent, the sharpest advance since Dec. 12. It has strengthened 0.6 percent this week. The U.S. currency was at 80.10 yen from 80.28, set for a 1.7 percent gain since June 15. The yen added 0.1 percent to 100.60 per euro.
The MSCI Asia Pacific Index of regional shares lost 1 percent today, while the Standard & Poor’s 500 Index (SPX) sank 2.2 percent yesterday.
Ifo Survey
The Munich-based Ifo institute will probably say today its business climate index, based on a survey of 7,000 executives, dropped to 105.6 from 106.9 in May, according to the median estimate of economists in a Bloomberg News survey.
Data yesterday showed euro-area manufacturing shrank at the fastest pace in three years and a Chinese output gauge indicated contraction. More Americans than forecast filed claims for jobless benefits, manufacturing in the Philadelphia region shrank and sales of existing homes fell.
“It looks like the world’s economies are dragging each other down,” said Kazuo Shirai, a trader at Union Bank NA in Los Angeles. “The markets are getting risk-off with stock prices falling.”
Credit Suisse Group AG’s credit rating was cut three levels by Moody’s, Morgan Stanley was reduced two notches and 13 other banks were downgraded yesterday.
The lenders that were downgraded have “significant exposure to the volatility and risk of outsized losses inherent to capital-markets activities,” Moody’s Global Banking Managing Director Greg Bauer said in a statement.
Spanish Banks
In Europe, the fiscal turmoil escalated after Spain asked for a bailout of as much as 100 billion-euro ($126 billion) to prop up its banks on June 9. The nation’s 10-year borrowing costs this week rose above the 7 percent level that prompted bailouts in other nations amid concern over the burden posed to the sovereign by troubled banks.
German Chancellor Angela Merkel, French President Francois Hollande, Italian Prime Minister Mario Monti and Spanish Premier Mariano Rajoy are set to gather in Rome today. The meeting is to help prepare for a June 28-29 European Union summit in Brussels at which leaders will discuss the path to further financial integration, including proposals for closer banking cooperation.
“The news out of Europe remains pretty dour, despite the fact that we’ve had a bit of consolidation higher the last couple weeks,” Mike Moran, a currency strategist at Standard Chartered Bank, said in a telephone interview from New York. “That plays into a broadly risk-averse investor mindset, which has been helping the dollar.”
The Dollar Index (DXY), which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, was at 82.230 today, after yesterday touching 82.398, the strongest level since June 13.
The euro is down from this year’s high of $1.3487 on Feb. 24 and has depreciated about 6.6 percent in the past 12 months, according to Bloomberg Correlation-Weighted Indexes that measure 10 developed-market currencies.
The dollar headed for a weekly gain against most of its major peers before data today forecast to show German business confidence fell this month, adding to signs that global growth is slowing.
The yen strengthened versus the majority of its 16 most- traded counterparts as Asian stocks extended a worldwide slump in equities, boosting demand for haven assets. The euro maintained its biggest decline in six months against the greenback after Moody’s Investors Service lowered credit ratings on 15 global banks, adding to concern that Europe’s fiscal woes are imperiling the world’s financial system.
“Should global growth slow, that is likely to lead to buying of the dollar,” said Daisaku Ueno, a senior foreign- exchange and fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo, a unit of Japan’s biggest listed bank. “In an ugly contest, the euro is likely to get more votes than the dollar because of the difference in their economic situations and monetary policy.”
The dollar traded at $1.2560 per euro as of 10:13 a.m. in Tokyo from yesterday, when it climbed 1.3 percent, the sharpest advance since Dec. 12. It has strengthened 0.6 percent this week. The U.S. currency was at 80.10 yen from 80.28, set for a 1.7 percent gain since June 15. The yen added 0.1 percent to 100.60 per euro.
The MSCI Asia Pacific Index of regional shares lost 1 percent today, while the Standard & Poor’s 500 Index (SPX) sank 2.2 percent yesterday.
Ifo Survey
The Munich-based Ifo institute will probably say today its business climate index, based on a survey of 7,000 executives, dropped to 105.6 from 106.9 in May, according to the median estimate of economists in a Bloomberg News survey.
Data yesterday showed euro-area manufacturing shrank at the fastest pace in three years and a Chinese output gauge indicated contraction. More Americans than forecast filed claims for jobless benefits, manufacturing in the Philadelphia region shrank and sales of existing homes fell.
“It looks like the world’s economies are dragging each other down,” said Kazuo Shirai, a trader at Union Bank NA in Los Angeles. “The markets are getting risk-off with stock prices falling.”
Credit Suisse Group AG’s credit rating was cut three levels by Moody’s, Morgan Stanley was reduced two notches and 13 other banks were downgraded yesterday.
The lenders that were downgraded have “significant exposure to the volatility and risk of outsized losses inherent to capital-markets activities,” Moody’s Global Banking Managing Director Greg Bauer said in a statement.
Spanish Banks
In Europe, the fiscal turmoil escalated after Spain asked for a bailout of as much as 100 billion-euro ($126 billion) to prop up its banks on June 9. The nation’s 10-year borrowing costs this week rose above the 7 percent level that prompted bailouts in other nations amid concern over the burden posed to the sovereign by troubled banks.
German Chancellor Angela Merkel, French President Francois Hollande, Italian Prime Minister Mario Monti and Spanish Premier Mariano Rajoy are set to gather in Rome today. The meeting is to help prepare for a June 28-29 European Union summit in Brussels at which leaders will discuss the path to further financial integration, including proposals for closer banking cooperation.
“The news out of Europe remains pretty dour, despite the fact that we’ve had a bit of consolidation higher the last couple weeks,” Mike Moran, a currency strategist at Standard Chartered Bank, said in a telephone interview from New York. “That plays into a broadly risk-averse investor mindset, which has been helping the dollar.”
The Dollar Index (DXY), which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, was at 82.230 today, after yesterday touching 82.398, the strongest level since June 13.
The euro is down from this year’s high of $1.3487 on Feb. 24 and has depreciated about 6.6 percent in the past 12 months, according to Bloomberg Correlation-Weighted Indexes that measure 10 developed-market currencies.
Euro Falls Before Italy, Spain Debt Auctions, EU Summit
The euro fell toward the lowest in more than a week before Italy and Spain auction securities tomorrow amid concern the debt crisis in the region is spreading to bigger economies.
The 17-nation currency snapped a gain from the end of last week before German data today that may signal a decline in consumer confidence. European Union leaders will hold a two-day summit starting June 28. The yen touched a two-month low against the dollar on speculation a plan to double Japan’s sales tax will deepen a conflict in the nation’s ruling party.
“There’s no short-term fix to the crisis” in Europe, said Kurt Magnus, executive director of currency sales in Sydney at Nomura Holdings Inc., Japan’s biggest brokerage. “It’s not risk-on yet, not a ‘buy-euro’ scenario.”
The euro lost 0.3 percent to $1.2536 as of 10:47 a.m. in Tokyo after falling to as low as $1.2519 on June 22, the least since June 13. It declined 0.4 percent to 100.67 yen. The Japanese currency touched 80.62 per dollar, the weakest since April 27, before trading at 80.29, up 0.2 percent from the June 22 close.
The MSCI Asia Pacific Index (MXAP) of shares fell 0.6 percent, boosting demand for the dollar and yen as a haven.
Italy is scheduled to sell inflation-linked securities maturing in 2016 and 2026 tomorrow as well as 3 billion euros ($3.8 billion) of zero-coupon bonds. Spain will offer three- and six-month bills the same day.
GfK SE (GFK) may say today that its consumer-sentiment index for Germany will fall to 5.6 next month, the lowest this year, from 5.7 in June, according to the median estimate of economists in a Bloomberg News survey.
EU Summit
Europe’s shared currency has lost 2.7 percent over the past three months, the worst performance among the 10 developed- market currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen was the biggest winner with a 6.6 percent advance, followed by a 3.7 percent gain for the dollar.
The Brussels summit is the first meeting of European leaders since the Greek parliamentary elections on June 17 when New Democracy leader Antonis Samaras won on his pledge to seek relief from austerity measures imposed on the country while keeping the bailout funds flowing. The Greek prime minister won’t attend the meeting on the advice of his doctors after undergoing surgery to repair a detached retina.
‘Systemic Risks’
“It’s still too expensive for both Greece and its fellow EU members for Greece’s exit at the moment given systemic risks involved,” David Forrester, senior vice president for Group- of-10 foreign-exchange strategy in Singapore at Macquarie Bank Ltd., said in an interview with Bloomberg Television. “We think that rational heads will prevail and that all parties will come to keep Greece in the euro at least for the coming six months, and that should be good news for the euro.”
Options traders have cut their bearish bets on the euro. The currency’s one-month risk-reversal rate climbed to minus 1.29 percent on June 21, the highest since May 1, and was at minus 1.39 percent today. The advance in the rate signals a relative decrease in the demand for put options, which grant traders the right to sell the euro versus the dollar.
Prime Minister Yoshihiko Noda’s Democratic Party of Japan struggled to overcome internal resistance to his bill to double Japan’s sales tax. The lower house of parliament will vote on the consumption tax-bill tomorrow, DPJ lawmaker Koichi Takemasa told reporters today.
“Japan’s Diet is set to vote on increasing the country’s sales tax,” Mansoor Mohi-uddin, head of foreign-exchange strategy in Singapore at UBS AG, wrote in an e-mailed note on June 23. “If this splits the ruling Democratic Party of Japan, it could lead to the government falling, pushing up dollar-yen further.”
The euro fell toward the lowest in more than a week before Italy and Spain auction securities tomorrow amid concern the debt crisis in the region is spreading to bigger economies.
The 17-nation currency snapped a gain from the end of last week before German data today that may signal a decline in consumer confidence. European Union leaders will hold a two-day summit starting June 28. The yen touched a two-month low against the dollar on speculation a plan to double Japan’s sales tax will deepen a conflict in the nation’s ruling party.
“There’s no short-term fix to the crisis” in Europe, said Kurt Magnus, executive director of currency sales in Sydney at Nomura Holdings Inc., Japan’s biggest brokerage. “It’s not risk-on yet, not a ‘buy-euro’ scenario.”
The euro lost 0.3 percent to $1.2536 as of 10:47 a.m. in Tokyo after falling to as low as $1.2519 on June 22, the least since June 13. It declined 0.4 percent to 100.67 yen. The Japanese currency touched 80.62 per dollar, the weakest since April 27, before trading at 80.29, up 0.2 percent from the June 22 close.
The MSCI Asia Pacific Index (MXAP) of shares fell 0.6 percent, boosting demand for the dollar and yen as a haven.
Italy is scheduled to sell inflation-linked securities maturing in 2016 and 2026 tomorrow as well as 3 billion euros ($3.8 billion) of zero-coupon bonds. Spain will offer three- and six-month bills the same day.
GfK SE (GFK) may say today that its consumer-sentiment index for Germany will fall to 5.6 next month, the lowest this year, from 5.7 in June, according to the median estimate of economists in a Bloomberg News survey.
EU Summit
Europe’s shared currency has lost 2.7 percent over the past three months, the worst performance among the 10 developed- market currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen was the biggest winner with a 6.6 percent advance, followed by a 3.7 percent gain for the dollar.
The Brussels summit is the first meeting of European leaders since the Greek parliamentary elections on June 17 when New Democracy leader Antonis Samaras won on his pledge to seek relief from austerity measures imposed on the country while keeping the bailout funds flowing. The Greek prime minister won’t attend the meeting on the advice of his doctors after undergoing surgery to repair a detached retina.
‘Systemic Risks’
“It’s still too expensive for both Greece and its fellow EU members for Greece’s exit at the moment given systemic risks involved,” David Forrester, senior vice president for Group- of-10 foreign-exchange strategy in Singapore at Macquarie Bank Ltd., said in an interview with Bloomberg Television. “We think that rational heads will prevail and that all parties will come to keep Greece in the euro at least for the coming six months, and that should be good news for the euro.”
Options traders have cut their bearish bets on the euro. The currency’s one-month risk-reversal rate climbed to minus 1.29 percent on June 21, the highest since May 1, and was at minus 1.39 percent today. The advance in the rate signals a relative decrease in the demand for put options, which grant traders the right to sell the euro versus the dollar.
Prime Minister Yoshihiko Noda’s Democratic Party of Japan struggled to overcome internal resistance to his bill to double Japan’s sales tax. The lower house of parliament will vote on the consumption tax-bill tomorrow, DPJ lawmaker Koichi Takemasa told reporters today.
“Japan’s Diet is set to vote on increasing the country’s sales tax,” Mansoor Mohi-uddin, head of foreign-exchange strategy in Singapore at UBS AG, wrote in an e-mailed note on June 23. “If this splits the ruling Democratic Party of Japan, it could lead to the government falling, pushing up dollar-yen further.”
Aussie Dollar Gains as Investors Pare Back Rate-Cut Bets
Australia’s dollar rallied after touching its weakest level in 1 1/2 weeks yesterday as traders pared bets on interest-rate cuts on speculation the nation’s economy will be strong enough to weather Europe’s debt crisis.
The so-called Aussie strengthened versus most of its 16 major counterparts before officials of the Reserve Bank of Australia gather next week for a policy meeting, where they are forecast to keep the key rate unchanged, according to a Bloomberg News survey. Gains in the Australian and New Zealand currencies were limited before Spanish Economy Minister Luis de Guindos speaks in parliament today after Moody’s Investors Service cut the credit ratings of 28 Spanish lenders.
“The market’s pricing for the extent of RBA rate cuts looks overdone,” said Khoon Goh, a senior foreign-exchange strategist in Singapore at Australia & New Zealand Banking Group Ltd. (ANZ) “I don’t think the Aussie will get sold off too heavily, unless we get a real deterioration in the euro zone debt crisis. Eventually we see the Aussie heading up towards the $1.04 level, probably by early next year.”
The Australian dollar rose 0.1 percent to $1.0024 as of 11:07 a.m. in Sydney after reaching 99.69 U.S. cents yesterday, the lowest since June 14. The Aussie gained 0.2 percent to 79.92 yen. New Zealand’s currency advanced 0.2 percent to 78.89 cents after dropping 0.4 percent to 78.73 yesterday. It was at 62.89 yen, 0.3 higher than yesterday’s close.
The Aussie has dropped 1.8 percent versus the U.S. dollar since Dec. 31. The kiwi has advanced 1.5 percent.
Australia’s 10-year government bond yield fell five basis points, or 0.05 percentage point, to 2.95 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was unchanged at 2.69 percent.
Policy Meeting
RBA officials will probably keep the overnight cash-rate target at 3.5 percent when they meet on July 3, according to the median estimate in a Bloomberg survey of economists.
Interest-rate swaps data compiled by Bloomberg show traders see a better than 40 percent chance policy makers will keep the benchmark rate unchanged next week. That’s up from a more than 29 percent probability seen on June 19.
Spain’s de Guindos will speak in parliament to explain the nation’s request for as much as 100 billion euros ($125 billion) to recapitalize its banks. Moody’s cut the long-term debt and deposit ratings of Spanish lenders including Banco Santander SA (SAN) and Banco Bilbao Vizcaya Argentaria SA (BBVA), according to a statement yesterday.
Australia’s dollar rallied after touching its weakest level in 1 1/2 weeks yesterday as traders pared bets on interest-rate cuts on speculation the nation’s economy will be strong enough to weather Europe’s debt crisis.
The so-called Aussie strengthened versus most of its 16 major counterparts before officials of the Reserve Bank of Australia gather next week for a policy meeting, where they are forecast to keep the key rate unchanged, according to a Bloomberg News survey. Gains in the Australian and New Zealand currencies were limited before Spanish Economy Minister Luis de Guindos speaks in parliament today after Moody’s Investors Service cut the credit ratings of 28 Spanish lenders.
“The market’s pricing for the extent of RBA rate cuts looks overdone,” said Khoon Goh, a senior foreign-exchange strategist in Singapore at Australia & New Zealand Banking Group Ltd. (ANZ) “I don’t think the Aussie will get sold off too heavily, unless we get a real deterioration in the euro zone debt crisis. Eventually we see the Aussie heading up towards the $1.04 level, probably by early next year.”
The Australian dollar rose 0.1 percent to $1.0024 as of 11:07 a.m. in Sydney after reaching 99.69 U.S. cents yesterday, the lowest since June 14. The Aussie gained 0.2 percent to 79.92 yen. New Zealand’s currency advanced 0.2 percent to 78.89 cents after dropping 0.4 percent to 78.73 yesterday. It was at 62.89 yen, 0.3 higher than yesterday’s close.
The Aussie has dropped 1.8 percent versus the U.S. dollar since Dec. 31. The kiwi has advanced 1.5 percent.
Australia’s 10-year government bond yield fell five basis points, or 0.05 percentage point, to 2.95 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was unchanged at 2.69 percent.
Policy Meeting
RBA officials will probably keep the overnight cash-rate target at 3.5 percent when they meet on July 3, according to the median estimate in a Bloomberg survey of economists.
Interest-rate swaps data compiled by Bloomberg show traders see a better than 40 percent chance policy makers will keep the benchmark rate unchanged next week. That’s up from a more than 29 percent probability seen on June 19.
Spain’s de Guindos will speak in parliament to explain the nation’s request for as much as 100 billion euros ($125 billion) to recapitalize its banks. Moody’s cut the long-term debt and deposit ratings of Spanish lenders including Banco Santander SA (SAN) and Banco Bilbao Vizcaya Argentaria SA (BBVA), according to a statement yesterday.
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Oil Trades Below $80 a Fifth Day on U.S. Stockpile Gain
Oil traded below $80 a barrel for a fifth day in New York as rising U.S. crude stockpiles stoked speculation demand will falter, countering signs that output from Iran and Norway will be disrupted.
Futures swung between gains and losses after the American Petroleum Institute said inventories rose 507,000 barrels last week. A government report today is forecast to show supplies slid 1.3 million barrels after unexpectedly climbing to a 22- year high the prior week. Iran’s exports will “gradually” fall amid maintenance on fields and reservoirs just as a European Union embargo starts, according to Deputy Oil Minister Ahmad Ghalebani. Three more Norwegian fields shut in a labor dispute.
“Inventory figures will be watched more than usual after we had that surprising increase,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “It will give some insight into whether it was a blip or whether there is a more disturbing trend of inventory builds, which would indicate weaker than anticipated demand. As we move into July we’re going to see what the actual impact is in Iran.”
Oil for August delivery was at $79.51 a barrel, up 15 cents, in electronic trading on the New York Mercantile Exchange at 1 p.m. Sydney time. The contract yesterday rose 15 cents, or 0.2 percent, to $79.36, the highest close since June 22. Prices have fallen 23 percent this quarter, the biggest drop since the final three months of 2008.
Brent oil for August settlement slid 9 cents to $92.93 a barrel on the London-based ICE Futures Europe exchange, after surging 2.2 percent yesterday. The European benchmark’s premium to West Texas Intermediate was at $13.42, from $13.66 yesterday.
Iran Output
Iran’s crude exports may decline by 20 percent to 30 percent because of field maintenance, Ghalebani, who is also head of National Iranian Oil Co., told reporters at an energy conference in Moscow. He didn’t say what the country’s rate of exports or production was. Iran produced an average 3.14 million barrels a day of oil in May, according to the Organization of Petroleum Exporting Countries, making it the second-biggest producer in the group, after Saudi Arabia.
Ghalebani also said that “maybe, yes” Iran’s field maintenance was timed to coincide with the EU sanctions. The ban on oil imports from the Islamic Republic starts on July 1 as part of Western pressure to halt its nuclear program.
Strike Escalation
The strike by platform workers in Norway, which enters its fourth day today, has halted production of 180,000 barrels a day of oil equivalent. Companies decided to shut the Veslefrikk, Brage and Oseberg C fields yesterday, said Jan Hodneland, chief negotiator of the Norwegian Oil Industry Association, whose members include Statoil ASA (STL) and BP Plc. (BP/)
The industrywide action is the nation’s first since 2004. The three main unions involved will meet June 29 to discuss a possible escalation, according to Leif Sande, president of Industry Energy.
U.S. gasoline supplies rose 373,000 barrels last week, data from the API showed after the settlement yesterday. They are forecast to increase 1 million barrels, according to the median estimate of 12 analysts in a Bloomberg survey before an Energy Department report today.
The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.
Oil traded below $80 a barrel for a fifth day in New York as rising U.S. crude stockpiles stoked speculation demand will falter, countering signs that output from Iran and Norway will be disrupted.
Futures swung between gains and losses after the American Petroleum Institute said inventories rose 507,000 barrels last week. A government report today is forecast to show supplies slid 1.3 million barrels after unexpectedly climbing to a 22- year high the prior week. Iran’s exports will “gradually” fall amid maintenance on fields and reservoirs just as a European Union embargo starts, according to Deputy Oil Minister Ahmad Ghalebani. Three more Norwegian fields shut in a labor dispute.
“Inventory figures will be watched more than usual after we had that surprising increase,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “It will give some insight into whether it was a blip or whether there is a more disturbing trend of inventory builds, which would indicate weaker than anticipated demand. As we move into July we’re going to see what the actual impact is in Iran.”
Oil for August delivery was at $79.51 a barrel, up 15 cents, in electronic trading on the New York Mercantile Exchange at 1 p.m. Sydney time. The contract yesterday rose 15 cents, or 0.2 percent, to $79.36, the highest close since June 22. Prices have fallen 23 percent this quarter, the biggest drop since the final three months of 2008.
Brent oil for August settlement slid 9 cents to $92.93 a barrel on the London-based ICE Futures Europe exchange, after surging 2.2 percent yesterday. The European benchmark’s premium to West Texas Intermediate was at $13.42, from $13.66 yesterday.
Iran Output
Iran’s crude exports may decline by 20 percent to 30 percent because of field maintenance, Ghalebani, who is also head of National Iranian Oil Co., told reporters at an energy conference in Moscow. He didn’t say what the country’s rate of exports or production was. Iran produced an average 3.14 million barrels a day of oil in May, according to the Organization of Petroleum Exporting Countries, making it the second-biggest producer in the group, after Saudi Arabia.
Ghalebani also said that “maybe, yes” Iran’s field maintenance was timed to coincide with the EU sanctions. The ban on oil imports from the Islamic Republic starts on July 1 as part of Western pressure to halt its nuclear program.
Strike Escalation
The strike by platform workers in Norway, which enters its fourth day today, has halted production of 180,000 barrels a day of oil equivalent. Companies decided to shut the Veslefrikk, Brage and Oseberg C fields yesterday, said Jan Hodneland, chief negotiator of the Norwegian Oil Industry Association, whose members include Statoil ASA (STL) and BP Plc. (BP/)
The industrywide action is the nation’s first since 2004. The three main unions involved will meet June 29 to discuss a possible escalation, according to Leif Sande, president of Industry Energy.
U.S. gasoline supplies rose 373,000 barrels last week, data from the API showed after the settlement yesterday. They are forecast to increase 1 million barrels, according to the median estimate of 12 analysts in a Bloomberg survey before an Energy Department report today.
The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.
Euro Remains Lower Before Italy’s Debt Sales
The euro was set for the biggest quarterly drop versus the yen since September amid concern the region’s debt crisis is spreading to bigger economies.
The 17-nation currency remained lower against the dollar following a three-day decline before an Italian debt auction today and data forecast to show economic confidence in the euro bloc deteriorated. At a summit starting in Brussels today, European Union leaders will convene for the first time since pro-bailout parties won at Greek parliamentary elections on June 17. The dollar slid versus most major counterparts as gains in stocks supported demand for higher-yielding assets.
“People are looking for further weakness in the euro,” said Alex Sinton, director for institutional foreign exchange in Auckland at Australia & New Zealand Banking Group Ltd. (ANZ) “Growth there is waning.”
The euro slid 0.1 percent to 99.29 yen as of 10:02 a.m. in Tokyo from the close in New York yesterday. It rallied 0.2 percent to $1.2491 after losing 0.8 percent over the past three days. The dollar slid 0.3 percent to 79.50 yen.
Since the end of March, Europe’s shared currency has fallen 10 percent versus the yen and 6.4 percent against the dollar. As the first half of the year nears its close, the dollar is up 3.4 percent in 2012 against the yen.
Italy is scheduled to sell 2.5 billion euros ($3.1 billion) of five-year notes and 3 billion euros of 10-year debt today, following two auctions this week that saw borrowing costs increase. The 185-day bills sold yesterday got a rate of 2.957 percent, while the zero-coupon, two-year notes offered on June 26 yielded 4.712 percent. Both were the highest this year.
The nation’s 10-year yields climbed to a five-month high of 6.34 percent on June 14, nearing the 7 percent level that spurred Greece, Ireland and Portugal to seek bailouts.
European Confidence
An index of executive and consumer sentiment in the euro area probably fell to 89.6 this month, the lowest since October 2009 and down from 90.6 in May, according to the median estimate of economists in a Bloomberg News survey. The European Commission will release the figure today.
EU leaders meeting today and tomorrow are due to discuss a plan seen playing out over more than a decade for closer European integration. The blueprint, written by EU President Herman Van Rompuy, centers on common banking supervision and deposit insurance, along with a “criteria-based and phased” move toward joint debt issuance.
The blueprint also suggests the EU could impose upper limits on budgets and debt levels of nations that use the euro.
“Until it begins, we don’t know what will come out of the summit,” said Kazuo Shirai, a trader at Union Bank NA in Los Angeles. “We can’t rule out the possibility that something substantial will emerge.”
The dollar slid against 15 of its 16 major counterparts as the MSCI Asia Pacific Index climbed 0.9 percent, rising a second day. The Australian dollar jumped 0.3 percent to $1.0114.
“The markets are leaning toward risk-on as you see stocks trading higher,” said Junichi Ishikawa, an analyst in Tokyo at IG Markets Securities Ltd. “That’s leading to dollar weakness across the board.”
The euro was set for the biggest quarterly drop versus the yen since September amid concern the region’s debt crisis is spreading to bigger economies.
The 17-nation currency remained lower against the dollar following a three-day decline before an Italian debt auction today and data forecast to show economic confidence in the euro bloc deteriorated. At a summit starting in Brussels today, European Union leaders will convene for the first time since pro-bailout parties won at Greek parliamentary elections on June 17. The dollar slid versus most major counterparts as gains in stocks supported demand for higher-yielding assets.
“People are looking for further weakness in the euro,” said Alex Sinton, director for institutional foreign exchange in Auckland at Australia & New Zealand Banking Group Ltd. (ANZ) “Growth there is waning.”
The euro slid 0.1 percent to 99.29 yen as of 10:02 a.m. in Tokyo from the close in New York yesterday. It rallied 0.2 percent to $1.2491 after losing 0.8 percent over the past three days. The dollar slid 0.3 percent to 79.50 yen.
Since the end of March, Europe’s shared currency has fallen 10 percent versus the yen and 6.4 percent against the dollar. As the first half of the year nears its close, the dollar is up 3.4 percent in 2012 against the yen.
Italy is scheduled to sell 2.5 billion euros ($3.1 billion) of five-year notes and 3 billion euros of 10-year debt today, following two auctions this week that saw borrowing costs increase. The 185-day bills sold yesterday got a rate of 2.957 percent, while the zero-coupon, two-year notes offered on June 26 yielded 4.712 percent. Both were the highest this year.
The nation’s 10-year yields climbed to a five-month high of 6.34 percent on June 14, nearing the 7 percent level that spurred Greece, Ireland and Portugal to seek bailouts.
European Confidence
An index of executive and consumer sentiment in the euro area probably fell to 89.6 this month, the lowest since October 2009 and down from 90.6 in May, according to the median estimate of economists in a Bloomberg News survey. The European Commission will release the figure today.
EU leaders meeting today and tomorrow are due to discuss a plan seen playing out over more than a decade for closer European integration. The blueprint, written by EU President Herman Van Rompuy, centers on common banking supervision and deposit insurance, along with a “criteria-based and phased” move toward joint debt issuance.
The blueprint also suggests the EU could impose upper limits on budgets and debt levels of nations that use the euro.
“Until it begins, we don’t know what will come out of the summit,” said Kazuo Shirai, a trader at Union Bank NA in Los Angeles. “We can’t rule out the possibility that something substantial will emerge.”
The dollar slid against 15 of its 16 major counterparts as the MSCI Asia Pacific Index climbed 0.9 percent, rising a second day. The Australian dollar jumped 0.3 percent to $1.0114.
“The markets are leaning toward risk-on as you see stocks trading higher,” said Junichi Ishikawa, an analyst in Tokyo at IG Markets Securities Ltd. “That’s leading to dollar weakness across the board.”
Baht falls on dollar buying speculation
The baht fell towards a three-week low on speculation that US-dollar demand from importers will exceed local-currency purchases by exporters. Government bonds were little changed.
The nation suffered a trade deficit of US$1.7 billion last month as an 18% increase in inbound shipments outstripped export growth of 7.68%, government data showed this week.
The deficit in the trade balance may continue for a while as imports of machinery related to last year's floods have been climbing, said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc in Tokyo.
The baht tends to see downward pressure from this aspect.
The baht fell towards a three-week low on speculation that US-dollar demand from importers will exceed local-currency purchases by exporters. Government bonds were little changed.
The nation suffered a trade deficit of US$1.7 billion last month as an 18% increase in inbound shipments outstripped export growth of 7.68%, government data showed this week.
The deficit in the trade balance may continue for a while as imports of machinery related to last year's floods have been climbing, said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc in Tokyo.
The baht tends to see downward pressure from this aspect.
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