Currencies

[Muthukali]

Aussie, Kiwi Set for Weekly Drop on Europe Growth Woes

The Australian and New Zealand dollars headed for weekly declines on speculation growth in the euro zone is continuing to slow even as European Union leaders outlined plans to boost the economy at a summit.

The so-called Aussie was set for its first five-day slide versus the greenback in four weeks before figures today that may confirm France’s first-quarter gross domestic product was unchanged from the previous period and ahead of data next week that may show the jobless rate in the 17-nation currency bloc climbed to a record. New Zealand’s dollar, nicknamed the kiwi, is poised to complete its biggest weekly drop since May after a report showed home-building approvals fell last month.

“Whatever does eventually come out of the summit, markets are sooner or later going to face up to the reality that growth in Europe is going to remain weak for some time,” said Mike Jones, a Wellington-based currency strategist at Bank of New Zealand Ltd. “We’re in an environment of slowing global growth, and that will certainly continue to weigh on the Aussie and kiwi.”

The Australian dollar lost 0.2 percent to $1.0022 as of 9:35 a.m. in Sydney, extending this week’s slide to 0.4 percent. It bought 79.50 yen, 0.4 percent lower than yesterday’s close in New York. New Zealand’s currency fell 0.4 percent to 78.54 U.S. cents and has dropped 0.7 percent since June 22. The so-called kiwi retreated 0.5 percent to 62.30 yen.

Monthly Gain
The Aussie is set for a 3 percent advance against the dollar this month, paring its decline this year to 1.8 percent. The kiwi has strengthened 4.2 percent since May 31, the biggest gainer after the Mexican peso among the greenback’s 16 major counterparts. It has gained 1.1 percent this year.

Australia’s 10-year government bond yield fell three basis points, or 0.03 percentage point, to 2.94 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was little changed at 2.66 percent.

A final estimate will probably confirm growth in France stalled in the three months ended March 31, with GDP unchanged after climbing 0.1 percent in the fourth quarter, according to the median estimate in a Bloomberg News survey. Paris-based national statistics office Insee will release the report today.

The jobless rate in the 17-nation euro zone was at 11.1 percent in May, a separate poll showed ahead of a report from the European Union’s statistics office due July 2. That would be the highest since the data series started in 1995. Data yesterday showed unemployment climbed in June for the fourth month this year in Germany, Europe’s biggest economy.

EU heads of government at a summit in Brussels struggled to meet demands by Spain and Italy for relief from rising borrowing costs, threatening to derail a 120 billion-euro ($149 billion) pledge to boost economic growth.

In New Zealand, home-building permits declined 7.1 percent last month after falling a revised 7.6 percent in April, government data showed today, completing the first consecutive slide since March 2011.

 

[Muthukali]

Canadian Dollar Weakens for 2nd Day as Traders Pare Risk Assets

Canada’s dollar fell for a second day against its U.S. counterpart as demand for currencies of commodity-producing nations eased amid speculation Europe’s financial crisis will slow global growth.

The currency slid to a three-week low and was poised for the biggest monthly drop versus major peers in more than a year on concern demand for the nation’s raw materials will ease and keep the Bank of Canada from raising interest rates. European Union leaders opened a two-day summit on their debt crisis.

“There’s a combination of factors weighing on the Canadian dollar and other risk assets,” Emanuella Enenajor, an economist in Toronto at Canadian Imperial Bank of Commerce’s CIBC World Markets, said in a telephone interview. “One is the euro summit that started today, and the continuing expectation that we’re not going to solve anything at the summit. Also, oil prices are falling. It’s a bad day for resources.”

Canada’s currency, nicknamed the loonie, dropped 0.8 percent to C$1.0332 per U.S. dollar at 5 p.m. in Toronto, after falling as low as C$1.0363, the weakest since June 6. One Canadian dollar buys 96.79 cents.

“It’s risk off, plain and simple,” Shaun Osborne, chief currency strategist at Toronto-Dominion Bank (TD)’s TD Securities unit, said in an e-mail.

While there’s been pressure to sell U.S. dollars around C$1.03, this may be overwhelmed by further risk aversion, Osborne said.

“My feeling is that we retest the C$1.0450 area at least in the next four to six weeks,” Osborne said.

June Drop
Canada’s currency has tumbled 1.4 percent in June against nine developed-world counterparts, the most since the 1.7 percent drop in April 2011, according to Bloomberg Correlation- Weighted Indexes.

Government bonds rose, dragging the yield on the nation’s 10-year benchmark bonds down five basis points, or 0.05 percentage point, to 1.68 percent. It reached a record low of 1.615 percent on June 1. The price of the 2.75 percent bond due in June 2022 climbed 43 cents to C$109.77.

Canadian 10-year bonds yielded 10 basis points more than equivalent-maturity U.S. securities today, the least in a month.

EU leaders meet today and tomorrow for the 19th summit on the region’s debt crisis. They are due to discuss a plan seen playing out over more than a decade for closer European integration. The blueprint, written by European Council President Herman Van Rompuy, centers on common banking supervision and deposit insurance, along with a “criteria-based and phased” move toward joint debt issuance.

Summit Headlines
“You just have to trade the summit headline by headline,” Adam Cole, global head of foreign-exchange strategy at Royal Bank of Canada’s RBC Capital Markets, said by phone from London. “If you had to take a directional view and stick to it, expectations going into the summit are so low, there has to be some risk of a pleasant surprise, which would be risk- positive.”

RBC predicts the Canadian dollar will reach parity with the greenback by year-end.

Stocks pared losses as German Chancellor Angela Merkel canceled a planned press briefing, spurring speculation EU leaders were near agreement. The Standard & Poor’s 500 Index was down 0.2 percent after dropping as much as 1.4 percent.

Van Rompuy later said at a news conference leaders have agreed to spend 120 billion euros ($149 billion) to stimulate growth and create jobs.

Futures on crude oil, Canada’s largest export, fell 2.2 percent to $78.46 a barrel in New York. Brent crude declined 1.6 percent to $92.03 a barrel.

“A general tone of risk aversion has weighed on equities, oil prices and the Canadian dollar,” Camilla Sutton, chief currency strategist at Bank of Nova Scotia (BNS)’s Scotiabank in Toronto, wrote in a note to clients.

 

[Muthukali]

Euro Falls Against Peers Before Jobs, Manufacturing Data

The euro fell against most peers before data today that may show the currency bloc’s jobless rate climbed to a record and manufacturing contracted, boosting prospects the European Central Bank will cut interest rates.

The ECB, which has kept borrowing costs at a record low of 1 percent since December, will probably lower the benchmark rate by 0.25 percentage point on July 5, a Bloomberg News survey of economists shows. The 17-nation currency posted the biggest jump in more than a year versus the yen on June 29 after euro leaders eased terms on loans to Spanish banks, taking a step toward resolving the region’s debt crisis.

“We can’t buy the euro yet,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp. (8711), a currency-margin company. “The outlook for Europe’s economy is still bleak, and it still remains to be seen what economic measures will be undertaken there.”

The euro dropped 0.4 percent to $1.2620 as of 11:50 a.m. in Tokyo from the close in New York on June 29. It fell 0.4 percent to 100.68 yen after rising 2.2 percent at the end of last week, the biggest advance on a closing basis since March 2011. The greenback was little changed at 79.77 yen.

The jobless rate in the euro zone probably rose to 11.1 percent in May from 11 percent the prior month, a Bloomberg News Survey of economists showed. It would be the highest on record going back to 1990.

London-based Markit Economics may confirm its gauge of the currency bloc’s manufacturing was 44.8 in June on a final reading, unchanged from an initial estimate, according to a separate poll of economists. A level below 50 indicates contraction.

EU Summit
Stocks jumped globally on June 29 after euro-area leaders dropped the requirement that governments get preferred creditor status on crisis loans to Spain’s blighted banks. Lenders can also be recapitalized directly with European bailout funds rather than being channeled through governments, European Union President Herman Van Rompuy said after a two-day summit.

“The latest EU summit has clearly bought time for the euro. But it still does not remove the bearish case for the currency,” Mansoor Mohi-uddin, head of foreign-exchange strategy in Singapore at UBS AG, wrote in a note on June 30. “The market is likely to focus on whether the ECB will cut interest rates” at the July 5 meeting.

Euro Shorts
Futures traders increased their bets that the euro will decline against the dollar, according to figures from the Washington-based Commodity Futures Trading Commission. The difference in the number of wagers by hedge funds and other large speculators on a drop in the euro compared with those on a gain was 159,880 on June 26, up from 141,066 a week earlier. The so-called net shorts reached a record 214,418 on June 5.

HSBC Holdings Plc and Markit Economics today said the final reading of its Chinese manufacturing index was 48.2 in June, down from 48.4 the prior month.

New Zealand’s dollar may climb to the highest in more than two months as its short-term momentum has a “bullish” bias, Niall O’Connor, a New York-based technical analyst at JPMorgan Chase & Co., wrote in a research note yesterday.

The so-called kiwi is facing an ‘important’’ test at the level of 80.60 U.S. cents to 80.90, which sits on a downtrend line from the Feb. 29 high, the analyst wrote. Rising above that level may take the currency toward April highs, according to O’Connor.

The South Pacific nation’s currency jumped as much as 2 percent on June 29 before trading little changed at 80.06 today. It reached 83.20 on April 13, the highest since March 2.

 

[Muthukali]

Yen Stays Stronger on Slowdown; Aussie Near 2-Month High

The yen remained higher against most of its major peers as signs of faltering global economic growth increased demand for haven assets.

Japan’s currency maintained a gain from yesterday against the dollar on speculation U.S. data today will show factory orders stagnated after the Institute for Supply Management’s gauge of manufacturing unexpectedly fell yesterday. Demand for the euro was limited on prospects the European Central Bank will ease policy this week. Australia’s dollar traded 0.4 percent from a two-month high before a central bank meeting today where policy makers are expected to keep rates unchanged.

“I’m probably most bullish on the yen because I think there’s a reasonable chance we’ll see risk aversion take hold again,” said Mike Jones, a Wellington-based currency strategist at Bank of New Zealand Ltd. “The U.S. economy has been losing steam to date.”

The yen was little changed at 99.96 per euro as of 8:53 a.m. in Tokyo from yesterday, when it advanced 1 percent. The Japanese currency bought 79.45 per dollar from 79.51. The euro traded at $1.2581 from yesterday, when it declined 0.7 percent to $1.2576. The Australian dollar bought $1.0238 from $1.0249 yesterday, when it touched $1.0278, the highest since May 4.

U.S. factory orders probably rose 0.1 percent in May after a 0.6 percent drop the previous month, according to the median estimate of economists surveyed by Bloomberg News before the Commerce Department releases its data today.

ISM Report
The ISM’s index fell to 49.7, worse than the most- pessimistic forecast in a Bloomberg survey, from 53.5 in May, the Tempe, Arizona-based group’s report showed yesterday. Figures less than 50 signal contraction. Measures of orders, production and export demand dropped to three-year lows.

The ECB will probably cut interest rates to 0.75 percent on July 5, according to the median estimate of economists surveyed by Bloomberg. The European Union’s statistics office in Luxembourg said yesterday the jobless rate in the euro-area rose to 11.1 percent in May from 11 percent in April. It was the highest since the data series started in 1995.

The Reserve Bank of Australia will keep its cash-rate target at 3.5 percent at today’s policy meeting, according to all 28 economists in a Bloomberg poll.

 

[saratogas]

Muthukali - I always wanted to ask, why so many ah nehs like to be money changer?

 

[Muthukali]

Muthukali - I always wanted to ask, why so many ah nehs like to be money changer?

Because their hands very fast? Because their minds can twist n turn very fast? Because they are born human calculator? Seriously I also want to know

 

[Muthukali]

Yen Remains Lower as Stocks Advance on Stimulus Prospects

The yen held losses against most of its major peers as Asian shares climbed for a sixth day amid speculation central bank stimulus efforts will prop up global growth, sapping demand for Japan’s currency as a refuge.

The dollar was 0.1 percent from a two-month low versus its Australian counterpart before U.S. data tomorrow that may show private employment rose at the slowest pace in 10 months. The International Monetary Fund said additional monetary easing may be needed in the U.S., while economists forecast the European Central Bank will probably cut interest rates tomorrow.

“The ECB story itself will do wonders to keep the risk on for a little bit longer,” said Gavin Stacey, the Sydney-based chief rate strategist at Barclays Plc. “What we’re seeing in terms of safe-haven currencies, a little bit of softness in dollar and yen, will be consistent with the idea that risk is extending.”

The yen traded little changed at 100.60 per euro as of 9:28 a.m. in Tokyo after losing 0.6 percent yesterday. It lost 0.1 percent to 79.87 per dollar. The greenback was at $1.2596 per euro after sliding 0.3 percent to $1.2608. The U.S. currency was little changed at $1.0284 per Australian dollar after reaching $1.0297 yesterday, the weakest since May 3.

The MSCI Asia Pacific Index of shares climbed 0.3 percent, set for its longest winning streak since December. U.S. financial markets are shut today for the Independence Day holiday.

Employment Data
Companies in the U.S. probably added 100,000 jobs in June, the smallest gain since August, a Bloomberg News poll of economists showed before ADP Employer Services releases the figure tomorrow.

The data precede a government report due July 6 that may show employers increased payrolls by 90,000 workers last month, according to economists. It would be a third month that employment grew by less than 100,000 and compares with a 69,000 gain in May, the lowest in a year.

The Federal Reserve bought $2.3 trillion of bonds in two rounds of so-called quantitative easing from 2008 through 2011 to stimulate growth through lower borrowing costs. Last month it expanded the so-called Operation Twist program that replaces short-term Treasuries in its portfolio with longer-term debt.

U.S. Jobs
“The market will start to focus on U.S. data and the prospect of further Fed action which should see the U.S. dollar weaken,” foreign-exchange strategists at BNP Paribas SA, including Mary Nicola in New York, wrote in a research note yesterday.’’

The U.S. economy will grow about 2.25 percent in 2013 amid a “tepid” recovery and the European debt crisis, the IMF said, lowering its previous projection of 2.4 percent.

“Further easing” by the Fed might be needed “if the situation was to deteriorate,” IMF Managing Director Christine Lagarde told reporters in Washington yesterday.

The ECB will probably lower its main refinancing rate by a quarter-percentage point to 0.75 percent tomorrow, according to the median estimate in a Bloomberg survey of economists.

London-based Markit Economics is likely to say today that a final reading on its euro-area composite index was unchanged at 46 last month from May, economists forecast. That’s the lowest since June 2009 and below the 50 level that signals expansion of services and manufacturing output.

“The euro is in a downward trend,” said Kikuko Takeda, a senior currency economist in London at the Bank of Tokyo- Mitsubishi UFJ Ltd., a unit of Japan’s biggest financial group by market value. “Given the euro region’s economy is bad, I can see a large chance that the ECB will cut interest rates this week.”

 

[Muthukali]

Birthday currency issued

The Bank of Thailand has launched commemorative 80-baht and 100-baht banknotes to mark the 80th birthday of Her Majesty the Queen and the 60th birthday of His Royal Highness Crown Prince Maha Vajiralongkorn.

Her Majesty's birthday is on Aug 12, while that of the Crown Prince is on July 28.

Central bank governor Prasarn Trairatvorakul said the bank will release 2 million 80-baht commemorative banknotes.

This will be the first time a banknote of this value has been printed.

The predominant colour of the special banknote is blue, the official colour of the Queen.

It is 80 millimetres wide, signifying the 80th birthday. A portrait of Their Majesties the King and Queen is on the front of the banknote.

On the back is a blue security thread imprinted with the number "80" which turns into a rose motif when tilted.

Mr Prasarn said the commemorative banknote will be encased in a hard-paper cover and priced at 120 baht each.

The banknotes will be available from Aug 9 onwards. The bank will also issue 10 million commemorative banknotes with a face value of 100 baht to celebrate HRH Crown Prince Maha Vajiralongkorn's 5th cycle, or 60th birthday, on July 28 and circulate them in the financial system.

The front of the special edition 100-baht banknote will be identical to those currently in circulation.

The back, however, will bear a portrait of the Crown Prince Maha Vajiralongkorn in full regalia and an illustration depicting the Crown Prince's investiture.

 

[Muthukali]

Vietnam’s bonds decline as interbank rates rise; dong steady

Vietnam’s bonds declined, driving the three-year yield to the highest level in almost eight weeks, as a cash squeeze cooled banks’ demand for government debt. The dong was little changed.

The yield on benchmark notes due 2015 climbed five basis points to 9.73 percent, the highest level since May 9, according to a daily fixing from banks compiled by Bloomberg. The overnight interbank deposit rate rose 50 basis points, or 0.50 percentage point, to 5.47 percent.

“Higher interbank rates showed some banks may have less cash available,” said Pham Phuong Lan, the Hanoi-based head of fixed-income and currency trading at the Bank for Investment & Development of Vietnam. “Demand for bonds seems to have declined lately.”

The dong traded at 20,890 per dollar as of 4:15 p.m. in Hanoi, compared with 20,985 yesterday, according to data from banks compiled by Bloomberg. The central bank set the reference rate at 20,828 per dollar, unchanged since Dec. 26, according to its website. The currency is allowed to fluctuate by as much as 1 percent on either side of the official rate.

 

[Muthukali]

Yuan will buck fall in value: experts

Currency set to rise while other emerging economies face problems
The eurozone crisis is taking a toll on emerging economies as their currencies record their biggest falls against the dollar since 1998, but the yuan is well placed to appreciate, analysts said.

"The recent weakness of the yuan and other currencies of emerging economies was not due to depreciation," said Cao Yuanzheng, chief economist at the Bank of China.

"Instead, the real reason is the rapid appreciation of the dollar as it became a 'safe haven' for investors,'' seeking shelter from the eurozone storm.

The yuan weakened 0.88 percent in the second quarter to 6.3541 to the dollar in Shanghai, the biggest quarterly decline since it de-pegged from the dollar in 2005.

It dropped 0.77 percent to 6.3610 in Hong Kong's offshore market during the same period.

The central bank lowered the currency's daily reference rate, its rate against the dollar, by 0.48 percent in the second quarter, while the dollar index, which rates the dollar against a basket of currencies, strengthened 4 percent as investors favored safer assets, according to data collected by Bloomberg.

The yuan has been allowed, since April, to trade as much as 1 percent on either side of the daily reference rate. Safe-haven demand has driven the dollar up and dragged down currencies of emerging economies, the Bank of China said last week.

By mid-June, the dollar index had climbed to 75.4 percent, an increase of 3.6 percent from the beginning of the year.

Currencies of the major emerging economies, such as Brazil, Russia, South Africa and India, depreciated in the second quarter between 10 to 13 percent, the biggest fall since 1998.

The Brazilian real witnessed the most dramatic fall of 13 percent, while the Indian rupee hit record lows against the dollar. The rupee has depreciated 10 percent since the start of April against the greenback.

"Capital outflow triggered by concern at the economic slowdown in these countries has led to falling currencies," said Wan Jun, an analyst at the Chinese Academy of Social Sciences.

Zhong Hong, an analyst at Bank of China, said that the outlook would be different from the third quarter on.

"For emerging economies, depreciation benefits exports, therefore it cannot be ruled out that some countries will tolerate the situation. But in the third quarter, the outlook for these currencies will be mixed.''

Zhang Monan, an economist at the State Information Center, said that although the yuan declined against the dollar recently, the scale is far less than other emerging economies.

"And China's economic strength means that long-term stable growth is ahead and there is no basis for any large depreciation of the yuan."

The yuan may actually start appreciating in the near future, Liu Ligang, head of China economics at the Australia and New Zealand Banking Group, said as China's official Purchasing Managers' Index, an indicator of manufacturing activity, had beaten expectations in June.

"And as the situation in Europe turns more positive, we believe the yuan will gradually start to appreciate," Liu said. He forecast that the yuan will appreciate by 1.5 percent throughout the year.

The official PMI dipped slightly to 50.2 in June from 50.4 in May due to cyclical reasons, said Zhang Zhiwei, chief China economist at Nomura Holdings.

"The PMI has a seasonal bias, falling on average by 1.1 points between May and June. Therefore the slight drop in June this year is a positive sign."

Zhang Wenhua, the owner of a company in Nanjing that exports products to Europe, said the recent depreciation of the yuan has benefited his business as exports increased.

"I think the currency will keep depreciating gradually in the next few months so I will definitely continue to use dollars to settle deals with clients," he said.

Exporters in Guangdong province said that the recent yuan depreciation has not damaged their businesses.

"We don't feel too much pressure because we have fixed the price of orders with clients," said Zhang Peizhen, general manager of Chenghai Henglong Plastic Toys, which exported goods valued at about 8 million yuan ($1.3 million) last year.

"Traders may be under some pressure if the value of the yuan is going up. But we often fix the price of short-term orders," she said.

Chen Feng, deputy general manager of Guangdong Xinghui Auto Model, said the company had already introduced measures to avoid risks brought by yuan fluctuation.

"Besides exporting, we also import raw materials to balance any fluctuation," Chen said.

 

[Muthukali]

Aussie Is Near Recrod Versus Euro Before ECB, BOE Meet

Australia’s dollar was 0.6 percent from a record high against the euro before European Central Bank and Bank of England meetings to discuss ways to provide economic stimulus, boosting demand for currencies tied to growth.

New Zealand’s dollar, known as the kiwi, was near its strongest level versus the greenback in two months before U.S. data tomorrow forecast to show payrolls in June probably concluded the smallest quarterly advance in more than two years. Australian Treasurer Wayne Swan said he will discuss trading between the Chinese yuan and the so-called Aussie next week in Hong Kong. Data today showed Australia’s trade deficit in May was smaller than economists expected.

“You might see the Aussie and kiwi supported a little bit if the BOE and ECB do more stimulus,” said Joseph Capurso, a strategist in Sydney at Commonwealth Bank of Australia. (CBA) “There’s a good chance that the Aussie-euro will soon hit a record high.”

The Australian dollar was at 81.92 euro cents as of 11:43 a.m. in Sydney from 82.03 yesterday, compared with a record high of 82.42 set on Feb. 7. The currency slid 0.1 percent to $1.0269, and fetched 82.16 yen from 82.08. New Zealand’s dollar weakened 0.1 percent to 80.29 U.S. cents after yesterday touching 80.65, the strongest level since May 3. It was at 64.24 yen from 64.19.

The ECB will probably cut its benchmark interest rate by 25 basis points to a record low 0.75 percent today, while the BOE is forecast to raise its target for bond purchases, according to economists in Bloomberg News surveys.

U.S. Employment
U.S. employers probably increased payrolls by 90,000 workers last month after a 69,000 gain in May, according to the median forecast of economists surveyed by Bloomberg before the Labor Department reports figures tomorrow. Excluding government agencies, private hiring may have climbed by 100,000, concluding the smallest quarterly advance since the first three months of 2010.

“There is a good chance U.S. jobs data will underperform expectations,” said Capurso. “That will put downward pressure on the U.S. dollar and upward pressure on the Aussie.”

Swan said Australia is taking action to promote and deepen the market in yuan-Australian dollar transactions.

Both the Australian and Chinese governments “are very keen to see us deepen and broaden this important market,” he said in an e-mailed statement today.

Australia’s imports outpaced exports by A$285 million ($293 million) in May from exceeding them by a revised A$26 million in the prior month, the Bureau of Statistics said in a report in Sydney today. The median estimate in a Bloomberg survey of economists was for a trade deficit of A$500 million.

 

[Muthukali]

Canada Dollar Reaches 2-Year High Versus Euro After ECB Rate Cut

The Canadian dollar strengthened to a two-year high against the euro after the European Central Bank cut interest rates to stimulate the bloc’s economies.

The loonie, as the currency is nicknamed, reached a seven- week high against the greenback, as reports indicated faster- than-forecast jobs growth in the U.S., the nation’s largest trading partner. China cut interest rates for the second time in a month and the Bank of England said it would extend its asset- purchase program.

“There is a commitment from central bankers to protect the stability of financial markets and maintain loose policy,” said Camilla Sutton, head of currency strategy in Toronto at Bank of Nova Scotia (BNS), in a phone interview. “That’s somewhat supportive of growth, and also important for growth are commodity currencies like Australia and Canada.”

Canada’s currency gained 1 percent to C$1.2569 per euro at 5 p.m. in Toronto, touching the strongest level since June 2010. The loonie was little changed against the greenback at C$1.0142 per U.S. dollar, after reaching the highest level since May 16. One Canadian dollar buys 98.60 U.S cents.

Implied volatility for one-month options on the Canadian dollar versus the euro fell to 7.92 percent, down from 9.53 percent June 6. The five-year average is 11.7 percent. Implied volatility, which traders quote and use to set option prices, signals the expected pace of currency swings.

Price Swings
Lower volatility is “highly encouraging” that high risk aversion trading in May will likely continue to lessen, Sutton said, adding that the euro will trade more on “fundamentals as opposed to fear of what could be.”

Government bonds rose, with the yield on the nation’s 10- year benchmark bonds trading at 1.82 percent. The Bank of Canada announced it will sell C$3.4 billion five-year notes on July 11. The bonds mature Sept. 9, 2017 and carry a coupon of 1.5 percent.

Pacific Investment Management Co.’s Ed Devlin said Canadian bonds don’t provide much value for investors as low yields limit scope for capital gains and global uncertainty prompts the world’s largest bond fund manager to take “defensive” positions.

Devlin, executive vice president and head of the Canadian portfolio management team at Pimco, said he’s underweight on Canadian short-term fixed income and has recently preferred bonds that allow investors to hedge against consumer-price gains.

Market View
“We’re not particularly long the Canadian market,” Devlin, a London-based portfolio manager, said in a telephone interview from Toronto. “I’m pretty defensive on the front end. There is not a lot to like about interest rates down here.”

The ECB cut its key interest rate by 25 basis points to a record 0.75 percent and reduced its deposit rate to zero for the first time. The shared currency weakened against 14 of its 16 major peers as ECB President Mario Draghi said some risks to growth have “materialized.” The pound dropped against the Canadian dollar as the Bank of England extended its asset- purchase program.

Canada’s central bank has kept its benchmark rate unchanged at 1 percent since September 2010.

Canada’s jobless rate is forecast to stay unchanged from May at 7.3 percent, according to a Bloomberg survey of economists before Statistics Canada agency release data tomorrow. The country is projected to have added 5,000 jobs in June, compared with a gain of 7,700 the month before.

Jobs Data
Roseland, New Jersey-based ADP Employer Services showed U.S. companies added 176,000 workers this month. The median forecast of economists surveyed by Bloomberg News called for a 100,000 advance.

“The employment situation in Canada does look relatively stronger than the U.S.,” said Shaun Osborne, chief currency strategist at Toronto-Dominion Bank (TD)’s TD Securities unit, in an interview. “It’s still a very slow job recovery situation in the U.S.”

A U.S. government report this week is projected to show employers added fewer than 100,000 workers for a third month in June. U.S. payrolls added 95,000 workers last month after a 69,000 gain in May, a Bloomberg survey showed before the Labor Department data on July 6.

The loonie has gained 1.9 percent this year among 10 developed-nation currencies in Bloomberg Correlation-Weighted Indexes, with the U.S. dollar adding 1.1 percent.

 

[Muthukali]

Dollar Reaches Two-Year High Versus Euro as Investors Seek Haven

The dollar strengthened to a two-year high against the euro as investors sought safety after U.S. employers added fewer jobs in June than forecast.

The greenback rose versus all of its 16 most-traded counterparts except the yen and Mexico’s peso as the last U.S. employment report before the Federal Reserve’s next meeting showed the jobless rate stayed unchanged at 8.2 percent. The euro also fell as a slide in Spanish industrial production added to concern Europe’s debt crisis will worsen.

“This report confirmed a slowdown that we’ve seen in the last month from the U.S. and global business sectors,” Dan Dorrow, head of research in Stamford, Connecticut, at Faros Trading LLC, said of the jobs data. The firm executes currency transactions on the behalf of hedge funds and institutional clients. “The overarching issue that’s led to dollar strength today is pervasive fear that there aren’t enough policy bullets to address the global slowdown.”

The dollar appreciated 0.8 percent to $1.2291 per euro at 5 p.m. New York time, extending its weekly gain to 3.1 percent, the most since September. It touched $1.2260, the strongest level since July 2010. The yen gained 0.3 percent to 79.66 per dollar and climbed 1.2 percent to 97.89 per euro.

The Dollar Index (DXY), which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six U.S. trade partners, advanced as much as 0.8 percent to 83.431. It was the highest since June 1, exceeding the 82.950 the gauge touched yesterday after European Central Bank President Mario Draghi said the euro bloc still faces risks after policy makers cut their benchmark interest rate to a record 0.75 percent. The index rallied 2 percent this week, the most since December.

Rand Tumbles
Commodity-linked currencies dropped, led by the South African rand, which slid versus all of its 16 most-traded peers. Stocks and commodities fell, with the Standard & Poor’s 500 Index (SPX) losing 0.9 percent and the S&P GSCI Index of 24 raw materials tumbling 2.4 percent.

Payrolls increased by 80,000 jobs after a revised gain of 77,000 in May, Labor Department data showed today in Washington. Economists projected an increase of 100,000, according to the median estimate in a Bloomberg News survey. Private employment, which excludes government agencies, grew 84,000 in June, the weakest in 10 months.

“There are two forces going on with this number,” John Shin, senior Group-of-10 foreign-exchange strategist at Bank of America Corp. in New York, said in a telephone interview. “One is the natural risk-off, dollar-positive sentiment. Counteracting that is that a weak number further implies more quantitative easing in the fall, which is dollar-negative.”

Debt Crisis
The greenback has gained 5.5 percent against the euro this year as investors sought havens amid speculation Europe’s financial turmoil was worsening and U.S. growth was slowing. The dollar fell 2.4 percent in June against the common currency on speculation European leaders were tackling their debt crisis.

The euro weakened earlier as Spanish industrial production adjusted for the number of working days fell 6.1 percent in May from a year earlier, after an 8.3 percent decline in April, the National Statistics Institute said in Madrid. Spain’s recession probably intensified in the second quarter as Europe’s debt crisis worsened, the central bank said on June 27.

The Spanish 10-year yield rose as much as 26 basis points, or 0.26 percentage point, to 7.04 percent after jumping 37 basis points yesterday.
‘Downside Risks’

“Downside risks to the euro-area economic outlook have materialized,” ECB President Mario Draghi said yesterday after cutting the main refinancing rate and reducing interest on overnight deposits to zero.

The euro slumped 7.8 percent over the past year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The dollar gained 8.8 percent, and the yen climbed 8.9 percent.

U.S. Treasuries rose today, pushing 10-year note yields down to as low as 1.55 percent, the least in a month, as investors sought havens.

Higher-yielding currencies fell. South Africa’s rand slid 1.4 percent to 8.2591 per dollar, and Norway’s krone dropped 1.1 percent to 6.1165. The Australian dollar lost 0.7 percent to $1.0213, and New Zealand’s dollar weakened 0.7 percent to 79.77 U.S. cents.

The pound rose for a third day against the euro as traders bet the Bank of England’s bond-purchase program will weigh less on the currency than the policies of other central banks. It gained 0.6 percent to 79.34 pence.

The Mexican peso gained 0.2 percent to 13.3909 per dollar after weakening earlier as much as 0.7 percent. The U.S. is Mexico’s biggest trade partner.

Fed Meeting
The Fed will issue its next policy statement on Aug. 1 after a two-day meeting. The central bank pumped $2.3 trillion into the financial system from 2008 to 2011 to support the economy in two rounds of debt purchases under quantitative easing. It’s shifting $667 billion of short-term debt in its holdings to longer-term debt to cap borrowing costs, a program it expanded last month, and has kept its benchmark interest rate at zero to 0.25 percent since December 2008.

Chairman Ben S. Bernanke said June 20 after the last policy meeting that the Fed is prepared to consider additional steps to spur growth and employment, including further asset purchases.

Policy makers last month lowered their forecasts for growth and raised their predictions for unemployment in each of the next three years. They now see 1.9 percent to 2.4 percent growth in 2012, down from their April forecast of 2.4 percent to 2.9 percent. The jobless rate will end the year at 8 percent to 8.2 percent, up from 7.8 percent to 8 percent in April.

China cut its key interest rate yesterday for the second time in a month, and the Bank of England expanded its asset- purchase stimulus program by 50 billion pounds ($78 billion) to 375 billion pounds.

 

[Muthukali]

Aussie Dollar Near One-Week Low Before Chinese Trade Data

Australia’s dollar traded 0.4 percent from a one-week low before data forecast to show growth in exports and import slowed in China, the nation’s biggest trading partner.

The so-called Aussie remained lower after a two-day decline against the yen ahead of a report that economists said will show a drop in French industrial production, adding to signs the global economy is losing momentum. Demand for New Zealand’s dollar was supported after data showed the country’s house prices climbed to a record last month and card spending increased.

“China is still slowing,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp. (WBC), Australia’s second-largest lender. “Weak Chinese data will be negative for the Aussie dollar.”

The Australian currency traded at $1.0198 as of 11:02 a.m. in Sydney from $1.0208 at the close in New York yesterday, when it touched $1.0155, the lowest since June 29. The Aussie weakened 0.2 percent to 81.08 yen, after falling 1.2 percent over the previous two days.

Speizer predicts the Australian dollar will drop below 99 U.S. cents over the next couple of months.

New Zealand’s dollar bought 79.59 U.S. cents from 79.64, and fetched 63.29 yen, 0.1 percent below yesterday’s close.

Chinese Trade
China’s overseas shipments probably rose 10.6 percent in June from a year earlier, after increasing 15.3 percent the prior month, according to the median forecast of economists in a Bloomberg News survey before the customs bureau releases the figures today. Imports are projected to have grown by 11 percent, compared with a 12.7 percent gain in May.

China is predicted to report a slowdown in gross domestic product growth in the second quarter when it releases economic expansion data on July 13.

In France, output from factories, mines and power plants may have declined 1 percent in May from April, when they rose 1.5 percent, according to a separate poll of economists ahead of today’s data.

House prices in New Zealand gained 0.3 percent in June from the previous month, when they increased 1.7 percent, according to an index published by the Real Estate Institute of New Zealand today. Spending on debit, credit and store cards also gained by 0.4 percent, another report showed, adding to signs of a recovery in domestic demand.

Australian government bonds dropped, pushing the yield on benchmark 10-year debt up by two basis points, or 0.02 percentage point, to 3.02 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was little changed at 2.7 percent.

 

[Muthukali]

Aussie, Kiwi Set for Weekly Drop on China Growth Concerns

The Australian and New Zealand dollars headed for their second week of losses amid signs China’s economy is slowing, dimming the outlook for the South Pacific nations’ exports to Asia’s biggest economy.

The so-called Aussie held onto the biggest decline against the yen since May as Asian shares failed to rally for a seventh day before data forecast to show growth in China’s gross domestic product in the second quarter was the slowest in three years. The Reserve Bank of New Zealand will announce today data on government debt held by international investors last month.

“We expect China’s Q2 GDP to disappoint,” said Gavin Stacey, the Sydney-based chief rate strategist at Barclays Plc. “That would be disappointing for the market and therefore would likely hit the Australian dollar.”

Australia’s currency was at $1.0128 at 10:54 a.m. in Sydney from $1.0139 at the close yesterday, set for a 0.8 percent drop this week. It was little changed at 80.39 yen, after weakening 1.7 percent yesterday, the sharpest decline since May 30. The New Zealand dollar traded little changed at 78.92 U.S. cents, having depreciated 1.1 percent since July 6, and fetched 62.61 yen from 62.62.

The yield on Australia’s one-year government notes slid as much as four basis points, or 0.04 percentage point, to an all- time low of 2.277 percent. The 10-year rate fell three basis points to 2.86 percent, the least since June 5.

The MSCI Asia Pacific Index lost 0.1 percent and is set for a 3.4 percent drop this week. The Standard & Poor’s 500 Index (SPX) of U.S. shares lost 0.5 percent yesterday and the Stoxx Europe 600 Index slid 1.1 percent.

China’s economy probably expanded 7.7 percent in the second quarter from a year earlier, down from 8.1 percent in the prior three months, according to the median estimate in a Bloomberg News survey of economists. That would be the slowest pace of growth since the first three months of 2009.

Today’s data may also show retail sales slipped to 13.4 percent in June from a year earlier in China, while industrial production growth picked up to 9.8 percent, according to separate polls.

 

[Muthukali]

Dollar Declines Before Bernanke Senate Testimony Today

The dollar weakened against most of its major peers amid speculation Federal Reserve Chairman Ben S. Bernanke will hint at further monetary easing in testimony before Congress today.

The greenback slid for a third day versus the euro after an unexpected drop in U.S. retail sales rekindled speculation the Fed will introduce additional steps to support the world’s largest economy. The 17-nation euro was 0.2 percent from the lowest in more than three years against the pound before German data that may signal deteriorating confidence among investors.

“There is market positioning for Bernanke to deliver something today,” said Joseph Capurso, a strategist in Sydney at Commonwealth Bank of Australia (CBA), the nation’s biggest lender. “There is a high risk of more policy easing before the end of this year.”

The dollar lost 0.3 percent to $1.2306 per euro as of 10:40 a.m. in Tokyo from the close in New York yesterday. It traded at 78.94 yen after losing 1.1 percent in the past three sessions to 78.87. The yen fell 0.3 percent to 97.11 per euro. The common currency was at 78.51 pence after touching 78.32 yesterday, the lowest since October 2008.

Bernanke will deliver his semiannual report on the economy and monetary policy. He will testify to the House Financial Services Committee tomorrow.

Fed Bank of Kansas City President Esther George said in a speech that the U.S. economy probably won’t grow much faster than 2 percent this year, held back by caution among consumers and businesses.

U.S. Economy
A Labor Department report may show today that the U.S. consumer-price index was unchanged last month from May when it slid 0.3 percent, according to the median estimate of economists surveyed by Bloomberg News. U.S. retail sales fell 0.5 percent in June, Commerce Department figures showed yesterday, whereas economists had forecast a 0.2 percent gain.

“If we don’t see continued improvement in the labor market, we’ll be prepared to take additional steps if appropriate,” Bernanke said on June 20. “Additional asset purchases would be among the things that we would certainly consider.”

The Fed bought $2.3 trillion of bonds in two rounds of so- called quantitative easing from 2008 to 2011, seeking to cap borrowing costs and stimulate the economy. Last month, it expanded the program known as Operation Twist that replaces short-term Treasuries in its portfolio with longer-term debt.

German Sentiment
The ZEW Center for European Economic Research may say today that its index of German investor and analyst expectations slid to minus 20 this month, the lowest since January, from minus 16.9 in June, the median estimate of economists shows. The gauge aims to predict economic developments six months in advance.

The euro has fallen 3.6 percent in the past three months, the worst performer along with the Swiss franc among the 10 developed-nation currencies tracked by Bloomberg Correlation- Weighted Indexes. The yen was the biggest winner with a 6.3 percent jump, followed by a 3.5 percent advance in the dollar.

“The euro will remain on a downtrend in the medium to long term,” said Yuki Sakasai, a currency strategist at Barclays Plc in New York. “Compared with the U.S., the euro region’s economy has more scope for monetary easing and is more prone to downside risks.”

The Australian dollar strengthened against all of its 16 major peers. “Consumption was being supported by a favorable labor market,” the central bank said in minutes of its July 3 policy meeting released today. “With recent signs that the domestic economy had a little more momentum than had earlier been indicated, members saw no need for any further adjustment to the cash rate.”

The so-called Aussie jumped 0.4 percent to $1.0291.

 

[Muthukali]

Canada Dollar Declines as Investors Avoid Risk; Bond Yields Fall

The Canadian dollar weakened against most of its major counterpart, as the nation’s 10-year bond yields declined to a record low.

Canada’s currency fell after U.S. retail sales unexpectedly declined for a third month. The Bank of Canada meets tomorrow, and policy makers are expected to hold interest rates at current levels, while Federal Reserve Chairman Ben S. Bernanke testifies before Congress. Foreign investors purchased a record C$26.1 billion ($25.7 billion) of Canadian securities in May.

“What’s bad for the U.S. is bad for Canada,” Camilla Sutton, chief currency strategist at Bank of Nova Scotia (BNS) in Toronto, said in a telephone interview. “Even tomorrow if we do have a less-hawkish-than-expected central bank, we may get a further bit of weakening in Canada, but I think it proves temporary.”

The loonie, as the currency is nicknamed, fell 0.1 percent against to C$1.0150 per U.S. dollar at 5 p.m. in Toronto. One Canadian dollar buys 98.52 U.S. cents.

Government 10-year bond yields fell to a record low 1.598 percent. The 2.75 percent security maturing in June 2022 rose 16 cents to C$110.31.

Sovereign-debt yields also slid to records in the U.S., U.K., France and Germany as concern the global economic recovery is slowing fueled demand for assets considered most safe.

“When there is significant attraction to triple-A-rated countries and debt, Canada tends to do really well,” Sutton said.

Overseas Demand
Foreign purchases of Canadian securities reached a record in May as demand for bonds was fed by a growing yield premium compared with U.S. debt and the currency weakened.

The May purchases of Canadian securities followed a net purchase of C$10.2 billion in April, Statistics Canada said today in Ottawa. May bond purchases of C$16.7 billion reached a three-year high, led by C$9.5 billion of existing federal government debt and another C$3.5 billion of debt from government-owned companies.

Existing home sales fell 1.3 percent in June from the previous month, the second straight month decline, the Canadian Real Estate Association said.

The Bank of Canada will meet tomorrow to discuss the country’s overnight lending rate. All 22 economists in a Bloomberg News survey estimate the central bank will hold the rate at 1 percent

“If people are expecting some easing considering economic weakness and what other central banks have done, it could be a positive for the Canadian dollar if the Bank of Canada doesn’t do anything, going against the flow,” Brian Kim, a currency strategist in Stamford, Connecticut, at Royal Bank of Scotland Group Plc, said in a telephone interview.

Retail Slowing
Data indicated the economy in the U.S., consumer of three quarters of Canada’s exports, is slowing. Commerce Department figures showed today in Washington that American retail sales unexpectedly declined 0.5 percent. The median forecast in a Bloomberg News survey called for a 0.2 percent rise.

Fed Chairman Bernanke is scheduled to testify before the Senate Banking Committee tomorrow, discussing the outlook for the economy and monetary policy. He will speak before the House Financial Services Committee the following day.

Bank of Nova Scotia’s Sutton said Bernanke may signal a third round of the Fed’s asset purchasing program, known as quantitative easing, in the fall if U.S. economic data does not improve.

“As long as he keeps the door open and potentially widening it to QE3, I think it’s hard for the U.S. dollar to remain sustainably and materially stronger than a currency like Canada,” Sutton said.

The Thomson Reuters/Jefferies CRB Commodity Index (CRY) rose 0.7 percent, while the S&P 500 (SPX) index fell 0.2 percent. Crude oil futures rose 1.3 percent to $88.20 per barrel in New York.

Commodity Prices
Dean Popplewell, an analyst in Toronto at the online currency-trading firm Oanda Corp., said commodity prices have not played a significant role for the Canadian dollar and likely won’t going forward.

“Over the last week or so, the loonie has traded stronger on back of its reserve optics,” Popplewell said in a telephone interview. “I expect that to remain the same.”

Canada’s dollar will weaken to the lowest level since November in the next few months before rallying to parity versus its U.S. counterpart as slowing global growth forces central banks to provide more monetary stimulus, according to the currency’s most accurate forecaster.

“You can’t make a straight line forecast under these circumstances,” said Stefan Marion, chief economist at National Bank of Canada (NA), citing the turmoil in global financial markets. Marion had the closest estimates on the so-called loonie for the past six quarters as tracked by Bloomberg Rankings.

 

[Muthukali]

Dollar Declines Before Bernanke Senate Testimony Today

The dollar weakened against most major counterparts amid speculation Federal Reserve Chairman Ben S. Bernanke will hint at additional stimulus when he speaks to Congress about monetary policy starting today.

The U.S. currency retreated after an unexpected decline in retail sales announced yesterday rekindled speculation the Fed is moving closer to a third round of asset purchases. The yen snapped a three-day advance against the greenback as Finance Minister Jun Azumi warned the central bank would take action against currency strength if needed. Australia’s dollar rose as central-bank minutes said the economy has some “momentum.”

“The economic news has worsened in an accelerated fashion in the past three months, so expectations are pretty high for further easing,” said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co. in New York. “The market will interpret further easing as dollar bearish, but you’ve really had to get bad U.S. data front and center for this to happen.”

The dollar was little changed at $1.2280 per euro at 9:02 a.m. New York time after falling earlier to $1.2317, the weakest level since July 10. The yen dropped 0.4 percent to 79.15 per dollar, and fell 0.4 percent to 97.19 per euro.

Bernanke will deliver his semi-annual report on the economy and monetary policy to the Senate Banking Committee today at 10 a.m. New York time. He will testify to the House Financial Services Committee tomorrow.

Consumer Prices
Retail sales unexpectedly fell 0.5 percent in June, the Commerce Department said yesterday. U.S. consumer prices were unchanged last month from May, when they slid 0.3 percent, Labor Department data showed today.

Fed Bank of Kansas City President Esther George said in a speech yesterday the U.S. economy probably won’t grow much faster than 2 percent this year, held back by caution among consumers and businesses.

“If we don’t see continued improvement in the labor market, we’ll be prepared to take additional steps if appropriate,” Bernanke said after the Fed’s most recent policy meeting on June 20. “Additional asset purchases would be among the things that we would certainly consider.”

The Fed bought $2.3 trillion of bonds in two rounds of a tactic called quantitative easing from 2008 to 2011, seeking to cap borrowing costs and stimulate the economy. Last month, it expanded the program known as Operation Twist that replaces short-term Treasuries in its portfolio with longer-term debt.

Possible Disappointment
“I would expect he’ll reiterate that he’ll do more if more is required, but not necessarily signal anything is imminent,” Adam Cole, global head of foreign-exchange strategy at Royal Bank of Canada’s RBC Capital Markets unit, said by phone from London. “There could be a bit of disappointment if he’s perceived to be his usual balanced self.”

The dollar has decreased 0.4 percent in the past week versus nine developed-nation counterparts tracked by Bloomberg Correlation-Weighted Indexes. The Australian dollar was the best performer, gaining 0.6 percent, while Sweden’s krona declined 0.7 percent.

The pound fell for the first time in three days against the euro and the dollar after a report showed an unexpected drop in U.K. inflation, stoking speculation the Bank of England will have further scope for monetary easing.

The central bank added 50 billion pounds ($78 billion) to its asset-purchase program this month as slowing inflation gave policy makers room to increase liquidity.

Sterling fell 0.2 percent to 78.61 pence per euro and slipped 0.1 percent to $1.5619.

Swedish Krona
Sweden’s krona gained for the first time in five days against the euro as central-bank minutes showed “there were differences on how expansionary monetary policy should be.”

The Riksbank kept its benchmark interest rate at 1.5 percent this month, after two cuts since December, and signaled it may be prepared to lower rates again as Europe’s debt crisis weighs on growth in the largest Nordic economy.

“The krona is modestly stronger following the release,” BNP Paribas SA strategists led by Steven Saywell, London-based head of currency strategy for Europe, wrote in a note to clients. “A major policy issue for several members was how the unexpectedly strong development of the Swedish economy should be seen in relation to the increased concern about a weaker development in the euro area. However, we wouldn’t chase euro- krona lower from here.”

The krona gained 0.4 percent to 8.6060 per euro, and strengthened 0.5 percent to 7.0088 per dollar.

Yen Falls
Japan’s currency fell for the first time in four days versus the dollar after Azumi said gains in the currency were “speculative” and officials will “take decisive action if needed.” The yen appreciated to 78.69 per dollar yesterday, the strongest level since June 18.

The Australian dollar rose for a third day against the U.S. currency after the central bank released the minutes of its July 3 policy meeting.

“Consumption was being supported by a favorable labor market,” the central bank said. “With recent signs that the domestic economy had a little more momentum than had earlier been indicated, members saw no need for any further adjustment to the cash rate.”

Australia’s dollar advanced 0.3 percent to $1.0287, and gained 0.7 percent to 81.36 yen.

 

[Muthukali]

Yen Gains Versus Euro, Dollar Before German Bailout Vote

The yen advanced against most major counterparts as concern about the implementation of measures to stem Europe’s debt crisis supported demand for Japan’s currency as a haven.

The yen held gains from yesterday before German lawmakers vote on a bailout for Spanish lenders. Chancellor Angela Merkel called on fellow leaders to work harder to make Europe succeed without waiting for unconditional German help. The dollar slid to the lowest in 2 1/2 months versus its Australian counterpart before a U.S. report today that may show first-time claims for jobless benefits climbed, boosting prospects the Federal Reserve will add to easing measures that debase the greenback.

“Nothing has been resolved on Europe’s debt crisis and it won’t end any time soon,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp. (8711), a currency-margin company. “The yen is being bought in such a negative situation because there are few other choices.”

The yen gained 0.1 percent to 96.71 per euro as of 10:06 a.m. in Tokyo. It touched 96.17 on July 16, the strongest level since June 1. The 17-nation euro was little changed at $1.2287. The dollar slid 0.1 percent to 78.69 yen and touched 78.67, the weakest since June 18. It traded at $1.0371 per Australian dollar after earlier reaching $1.0379, the weakest since May 1.

German lawmakers are due to vote in a special session of the lower house today in Berlin after the Finance Ministry asked parliament in a July 16 letter to support aid of as much as 100 billion euros ($122.8 billion) for Spain’s banks. The money would come from the temporary backstop, the European Financial Stability Facility, and then transfer to the future European Stability Mechanism.

‘No Liability’
Merkel indicated in an interview posted on her Christian Democratic Union party’s website yesterday that she won’t take on additional burdens to stem the euro area’s debt crisis without stronger checks on countries’ budgets. The principle of “no liability unless we can really exercise control” is shared by “a large part” of the German population, she said.

FX Prime’s Ueda said the euro may fall to $1.18 and 93 yen by the end of September.

In the U.S., figures from the Labor Department today may show initial jobless claims increased to 365,000 in the week ended July 14 from 350,000 in the previous period, according to the median estimate in a Bloomberg News survey.

Fed Prepared
The Fed said in its Beige Book business survey yesterday the economy expanded at a “modest to moderate” pace in June and early July. Fed Chairman Ben S. Bernanke said in testimony to the House Financial Services Committee yesterday in Washington that the central bank is “prepared to take further action as appropriate to promote a stronger economic recovery”

The euro declined 2.7 percent in the past month, the worst performance alongside the Swiss franc among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar climbed 0.8 percent and the yen gained 1.3 percent. The so-called Aussie posted the biggest advance in the same period, rising 2.9 percent.

The MSCI Asia Pacific Index (MXAP) of shares added 1.1 percent. A gauge of currency volatility dropped for a seventh day to the lowest in 4 1/2 years.

The implied volatility of three-month options on Group of Seven currencies fell to 8.68 percent, according to a JPMorgan Chase & Co. measure, the lowest since November 2007. Lower volatility makes investments in currencies with higher benchmark lending rates more attractive because the risk in such trades is that market moves will erase profits.

 

[Muthukali]

Aussie Near 11-Week High on Fed Stimulus Speculation

Australia’s dollar traded 0.3 percent from the highest level in 11 weeks before U.S. data next week that may add to the case for more monetary stimulus from the Federal Reserve.

The Australian and New Zealand dollars headed for weekly gains as raw material prices rose, boosting demand for the currencies of commodity exporting countries. Investor appetite for the so-called Aussie was limited as Asian stocks declined before data next week forecast to show Australian consumer prices grew at the slowest annual pace since June 1999.

“The U.S. economy is losing momentum and there’s growing expectation that the Fed will do more stimulus,” said Peter Dragicevich, foreign exchange economist at Commonwealth Bank of Australia (CBA) in Sydney. “You also had a solid increase in commodity prices, and that’s also helping support both the Aussie and the kiwi.”

Australia’s dollar traded at $1.0413 as of 11:40 a.m. in Sydney from $1.0427 yesterday, when it rose as much as 0.8 percent to $1.0444, the highest since April 30. The Aussie is headed for 1.8 percent gain this week, the biggest since the five-day period ended June 8.

New Zealand’s dollar was little changed at 80.25 U.S. cents from yesterday, when it reached 80.55, the strongest since July 5. The so-called kiwi is set for a 0.8 percent weekly advance.

The Thomson Reuters/Jefferies CRB Index of raw materials climbed 2 percent yesterday. The MSCI Asia Pacific Index of stocks lost 0.4 percent today.

U.S. Economy
U.S. gross domestic product probably expanded 1.5 percent in the second quarter, the slowest pace since June 2011, according to economists surveyed by Bloomberg News before the Commerce Department report on July 27.

“In our view the GDP is likely to be soft but not too soft, and will boost expectations about the Fed doing more stimulus,” said Commonwealth Bank’s Dragicevich. “That would keep the dollar pretty soft against the Aussie and kiwi.”

First time claims for unemployment insurance payments probably decreased by 6,000 to 380,000 in the week ended July 21, economists in a separate Bloomberg survey predict before Labor Department figures on July 26. The claims of 392,000 in the week ended June 16, matched the most this year.

The Fed released its Beige Book business survey this week, saying the U.S. economy expanded at a “modest to moderate” pace. It gives central bankers anecdotal evidence on the economy before a two-day policy meeting starts on July 31.

Rising Prices
In Australia, consumer prices probably grew 1.3 percent last quarter from the same three-month period last year, according to median estimate of economists surveyed by Bloomberg before the Bureau of Statistics releases figures on July 25. That would match the slowest annual pace since June 1999.

Interest-rate swaps indicate a 66 percent chance the Reserve Bank of Australia will lower its interest rate by 25 basis points at its next meeting on Aug. 7, according to data compiled by Bloomberg. That compares with a 59 percent chance indicated on July 18.

“The Australian dollar is looking firm, but it could consolidate after the gains we saw recently,” said Takuya Kawabata, a researcher at Gaitame.com Research Institute Ltd. in Tokyo, a unit of Japan’s largest currency margin company. “The CPI data poses some downside risks for the Aussie. The latest employment data was weak, so if we start to see inflation slowing as well, that could raise expectations for an RBA rate cut next month.”