The dollar weakened the most in almost a year, dropping from a four-year high, as uneven U.S. labor-market data refueled the debate over when the Federal Reserve will raise interest rates.
The greenback depreciated versus most of its 31 major peers, with Brazil’s real climbing the most in three years as President Dilma Rousseff faces a runoff against surprise second-place candidate Aecio Neves. The yen strengthened from almost its weakest since 2008 before the Bank of Japan’s policy decision tomorrow. South Africa’s rand gained the most in almost two months after Deputy Reserve Bank Governor Lesetja Kganyago was announced to lead the central bank.
“The dollar’s been very vulnerable to a correction,” said Mark McCormick, a foreign-exchange strategist in New York at Credit Agricole SA. “Given the economic fundamentals and given the landscape of what we’ve seen over the past few months in terms of where U.S. data’s playing out and where the U.S. rates story’s headed, I think the dollar’s definitely overshot.”
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major currencies, fell 0.8 percent to 1,070.35 at 2:16 p.m. in New York, the biggest drop since Oct. 17, 2013. It closed at 1,078.65 on Oct. 3, the highest since June 2010.
The gauge’s 14-day relative strength index was 69, just below above the 70 level that signals to some traders that gains have been excessive and may be poised to reverse, after rising to as high as 86 last week. South Korea’s won lost the most, sliding to a six-month low of 1,071.63 per dollar. The rand strengthened as much as 1.1 percent, the most on an intraday basis since Aug. 8, as Kganyago, one of two favored candidates, was named to succeed Governor Gill Marcus next month.
Sweden’s krona gained versus the euro and the Norwegian krone after Sweden’s largest food retailer ICA Gruppen AB sold a unit to Coop Norway. The krona advanced 0.2 percent to 9.0896 per euro and strengthened 0.5 percent to 1.1094 per Norwegian krone.
Factory Orders
The euro advanced against the U.S. currency, three days after touching a two-year low, even as German factory orders fell the most since 2009. Orders, adjusted for seasonal swings and inflation, fell 5.7 percent in August, the Economy Ministry in Berlin said today. Analysts predicted a 2.5 percent decline, according to the median estimate in a Bloomberg News survey.
The yen strengthened as the Bank of Japan, which buys about 7 trillion yen ($64 billion) of government bonds a month, started a two-day meeting today.
While BOJ Governor Haruhiko Kuroda said last week that he doesn’t think a weak yen is bad for the Japanese economy overall, Prime Minister Shinzo Abe today said the government will watch for effects of the currency’s decline and take measures.
Fed Dilemma
Fed Chair Janet Yellen’s dilemma over when to raise borrowing costs wasn’t made any clearer by conflicting employment data on Sept. 3.
While the U.S. jobless rate declined to a six-year low in September, the participation rate, which measures the number of Americans employed or looking for a job as a share of the working-age population, fell to the lowest level since February 1978. Average hourly earnings were unchanged.
“The market will want to reassess the speed with which the Fed will be moving,” Valentin Marinov, Citigroup Inc.’s London-based head of European Group of 10 currency strategy, said in an interview on Bloomberg Television’s “On The Move” with Jonathan Ferro. “The Fed is moving towards the exit, will be hiking rates before long, and that should, over the longer term, continue to support the dollar.”
‘Big Journey’
The Fed is on track to end stimulatory bond purchases that supported the U.S. economy through the recession, and is considering timing for the first interest-rate increases since 2006. The central bank releases minutes from its Sept. 16-17 meeting on Oct. 8. It convenes again on Oct. 29.
The dollar has jumped 7 percent in the past three months, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen weakened 0.6 percent and the euro declined 1.7 percent.
For the dollar, “it’s a big journey in a few days, so I expect things to maybe slow down just a little bit until we get another catalyst,” said Fabian Eliasson, who works in foreign-exchange sales at Mizuho Financial Group Inc. in New York. “The Fed’s being fairly data dependent here. If things improve dramatically, it will be hard to defend not doing anything.”
Brazil Real Rises Most in Year as Rousseff Faces Neves in Runoff
Brazil’s real climbed the most since August 2013 as President Dilma Rousseff faced a runoff against surprise second-place candidate Aecio Neves, who has appealed to investors by pledging to slow inflation.
The real rose 3.6 percent to 2.3732 per U.S. dollar at 9:04 a.m. in Sao Paulo after touching a five-year intraday low of 2.5073 per dollar on Oct. 3. Swap rates, a gauge of expectations for changes in borrowing costs, fell 18 basis points, or 0.18 percentage point, to 11.73 percent today on the contract due in January 2016.
“There is some euphoria going on as financial markets are celebrating the possibility that Neves may become the next president,” Paulo Petrassi, a fixed-income manager at Leme Investimentos Ltda. in Florianopolis, Brazil, said in a telephone interview.Speculation that a new government would revive economic growth and curb inflation helped to push the real to a one-month high in August.
Rousseff had 42 percent of the votes yesterday, followed by Neves with 34 percent and Marina Silva with 21 percent, Brazil’s Superior Electoral Court reported, based on 99.99 percent of ballots counted.
Neves received more votes than the 26 percent support he garnered in a Datafolha poll published Oct. 4. Rousseff had 44 percent in the poll that had a margin of error of plus or minus two percentage points.
Kuroda to Push Yen Toward January 2008 Low, Credit Agricole Says
The yen may drop to the weakest level since January 2008 versus the dollar, spurred by comments tomorrow from Bank of Japan Governor Haruhiko Kuroda, according to Credit Agricole SA.
Japan’s currency slid to a six-year low last week, following its worst month since January 2013 in September, amid prospects for the BOJ to continue unprecedented monetary easing while the Federal Reserve weighs the timing of its first interest rate increase. Kuroda will hold a news conference after a two-day meeting with his board that starts today. He reiterated on Oct. 3 that he doesn’t think a weak yen is a minus for the Japanese economy overall.
“If Kuroda again states there are few demerits to a weaker yen, it would be a catalyst for more yen selling,” said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo. “I expect the yen to make a run at 111.50 this week.”
That level marks the 50 percent retracement from the yen’s August 1998 low of 147.66 to its post-World War II high of 75.35 in October 2011, according to Fibonacci technical analysis.
Longer term, the yen will drop toward 112.63 per dollar, the 76.4 percent retracement of the 2007 low and the 2011 high, Saito said. The yen traded at 109.65 per dollar as of 11:34 a.m. in Tokyo, after touching 110.09 on Oct. 1, the weakest since August 2008. It tumbled 5.1 percent last month.
Policy Divergence
The BOJ will increase stimulus this year, according to about a quarter of the 33 economists surveyed by Bloomberg News between Sept. 26 and Oct. 2. An additional 42 percent expect an expansion of quantitative easing some time after the turn of the year. All the respondents expect the central bank to leave policy settings unchanged tomorrow.
Traders see a 76 percent chance the Fed will raise its target for overnight lending between banks by its September 2015 meeting, in what would be the first increase since 2006, futures data compiled by Bloomberg showed yesterday. That’s up from 73 percent odds seen on Sept. 1. Fibonacci analysis, based on the work of 13th century mathematician Leonardo of Pisa, is founded on the theory that prices rise or fall by certain percentages after reaching a new high or low.
Goldman Says Not So Fast as BlackRock Sees Earlier Fed Increase
Goldman Sachs Group Inc. says investors shouldn’t rush to anticipate a rate increase from the Federal Reserve after jobs gains beat economist forecasts. BlackRock Inc. said it’ll happen sooner than expected.
“Not so fast,” Jan Hatzius, the chief economist at Goldman Sachs in New York wrote in a report dated yesterday. Labor-market slack will help keep the Fed from raising borrowing costs until the third quarter of next year, according to Hatzius. Goldman, which gets the largest share of revenue from trading among U.S. banks, is one of the 22 primary dealers that trade directly with the central bank.
“The Fed’s going to move faster than people think,” BlackRock’s chief investment officer for fundamental fixed income Rick Rieder said Oct. 3, reiterating an earlier view. “We have an economy today that’s going, we think, quite strong,” he said on Bloomberg Television’s “Market Makers” with Erik Schatzker and Stephanie Ruhle. The company’s $4.32 trillion in assets make it the world’s biggest money manager.
The division highlights the dilemma Fed Chair Janet Yellen faces over when to raise borrowing costs from the record low while growth is uneven. Ten-year U.S. yields have fallen more than half a percentage point during 2014 as investors sought the relative safety of government debt amid concern the economy is performing below its potential.
The U.S. added 248,000 jobs in September, the Labor Department reported Oct. 3, compared with 215,000 projected by a Bloomberg News survey of economists. The jobless rate fell to 5.9 percent from 6.1 percent.
Trader Expectations
While hiring picked up, reports on Oct. 1 showed U.S. manufacturing growth slowed in September and data on Oct. 3 showed wage growth stagnated.
The implied yield on 30-day federal funds futures expiring in October 2015 was 0.565 percent, indicating traders expect the central bank to increase the target for its main interest rate from the current range of zero to 0.25 percent by then.
“We are looking for the Fed hike to come in the third quarter of next year,” said Richard Kelly, senior rates strategist at Toronto-Dominion Bank in London. The market is trying to price in an earlier rate increase and “that strong employment report was helpful but we know the Fed is much more wary of broad-based measures. The wage data did disappoint and you only care about the labor market to the extent that it’s generating wage growth. If that’s delaying, it can keep the Fed on pause for a little bit longer.”
Benchmark Estimate
Fed officials in September boosted their median estimate for the benchmark for the end of 2015 to 1.375 percent, compared with 1.125 percent in June. They have kept their target for the rate that banks charge each other on overnight loans close to zero since December 2008. Last month, policy makers also trimmed their monthly bond purchases for a seventh straight time, staying on course to end the program this month. They kept their pledge to maintain interest rates near zero for a “considerable time” after the asset buying stops.
The Fed will probably keep the language in its statement after its next meeting Oct. 28-29, Goldman’s Hatzius wrote.Fed Bank of St. Louis President James Bullard said last month the October meeting would be a “natural juncture” for ending the pledge.For BlackRock, the threat of higher short-term yields means it prefers long-term Treasuries and municipal bonds in the U.S., Rieder said.
“We’ve been stubbornly adamant” in calling for an early rate increase, he said.
source: Bloomberg
The greenback depreciated versus most of its 31 major peers, with Brazil’s real climbing the most in three years as President Dilma Rousseff faces a runoff against surprise second-place candidate Aecio Neves. The yen strengthened from almost its weakest since 2008 before the Bank of Japan’s policy decision tomorrow. South Africa’s rand gained the most in almost two months after Deputy Reserve Bank Governor Lesetja Kganyago was announced to lead the central bank.
“The dollar’s been very vulnerable to a correction,” said Mark McCormick, a foreign-exchange strategist in New York at Credit Agricole SA. “Given the economic fundamentals and given the landscape of what we’ve seen over the past few months in terms of where U.S. data’s playing out and where the U.S. rates story’s headed, I think the dollar’s definitely overshot.”
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major currencies, fell 0.8 percent to 1,070.35 at 2:16 p.m. in New York, the biggest drop since Oct. 17, 2013. It closed at 1,078.65 on Oct. 3, the highest since June 2010.
The gauge’s 14-day relative strength index was 69, just below above the 70 level that signals to some traders that gains have been excessive and may be poised to reverse, after rising to as high as 86 last week. South Korea’s won lost the most, sliding to a six-month low of 1,071.63 per dollar. The rand strengthened as much as 1.1 percent, the most on an intraday basis since Aug. 8, as Kganyago, one of two favored candidates, was named to succeed Governor Gill Marcus next month.
Sweden’s krona gained versus the euro and the Norwegian krone after Sweden’s largest food retailer ICA Gruppen AB sold a unit to Coop Norway. The krona advanced 0.2 percent to 9.0896 per euro and strengthened 0.5 percent to 1.1094 per Norwegian krone.
Factory Orders
The euro advanced against the U.S. currency, three days after touching a two-year low, even as German factory orders fell the most since 2009. Orders, adjusted for seasonal swings and inflation, fell 5.7 percent in August, the Economy Ministry in Berlin said today. Analysts predicted a 2.5 percent decline, according to the median estimate in a Bloomberg News survey.
The yen strengthened as the Bank of Japan, which buys about 7 trillion yen ($64 billion) of government bonds a month, started a two-day meeting today.
While BOJ Governor Haruhiko Kuroda said last week that he doesn’t think a weak yen is bad for the Japanese economy overall, Prime Minister Shinzo Abe today said the government will watch for effects of the currency’s decline and take measures.
Fed Dilemma
Fed Chair Janet Yellen’s dilemma over when to raise borrowing costs wasn’t made any clearer by conflicting employment data on Sept. 3.
While the U.S. jobless rate declined to a six-year low in September, the participation rate, which measures the number of Americans employed or looking for a job as a share of the working-age population, fell to the lowest level since February 1978. Average hourly earnings were unchanged.
“The market will want to reassess the speed with which the Fed will be moving,” Valentin Marinov, Citigroup Inc.’s London-based head of European Group of 10 currency strategy, said in an interview on Bloomberg Television’s “On The Move” with Jonathan Ferro. “The Fed is moving towards the exit, will be hiking rates before long, and that should, over the longer term, continue to support the dollar.”
‘Big Journey’
The Fed is on track to end stimulatory bond purchases that supported the U.S. economy through the recession, and is considering timing for the first interest-rate increases since 2006. The central bank releases minutes from its Sept. 16-17 meeting on Oct. 8. It convenes again on Oct. 29.
The dollar has jumped 7 percent in the past three months, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen weakened 0.6 percent and the euro declined 1.7 percent.
For the dollar, “it’s a big journey in a few days, so I expect things to maybe slow down just a little bit until we get another catalyst,” said Fabian Eliasson, who works in foreign-exchange sales at Mizuho Financial Group Inc. in New York. “The Fed’s being fairly data dependent here. If things improve dramatically, it will be hard to defend not doing anything.”
Brazil Real Rises Most in Year as Rousseff Faces Neves in Runoff
Brazil’s real climbed the most since August 2013 as President Dilma Rousseff faced a runoff against surprise second-place candidate Aecio Neves, who has appealed to investors by pledging to slow inflation.
The real rose 3.6 percent to 2.3732 per U.S. dollar at 9:04 a.m. in Sao Paulo after touching a five-year intraday low of 2.5073 per dollar on Oct. 3. Swap rates, a gauge of expectations for changes in borrowing costs, fell 18 basis points, or 0.18 percentage point, to 11.73 percent today on the contract due in January 2016.
“There is some euphoria going on as financial markets are celebrating the possibility that Neves may become the next president,” Paulo Petrassi, a fixed-income manager at Leme Investimentos Ltda. in Florianopolis, Brazil, said in a telephone interview.Speculation that a new government would revive economic growth and curb inflation helped to push the real to a one-month high in August.
Rousseff had 42 percent of the votes yesterday, followed by Neves with 34 percent and Marina Silva with 21 percent, Brazil’s Superior Electoral Court reported, based on 99.99 percent of ballots counted.
Neves received more votes than the 26 percent support he garnered in a Datafolha poll published Oct. 4. Rousseff had 44 percent in the poll that had a margin of error of plus or minus two percentage points.
Kuroda to Push Yen Toward January 2008 Low, Credit Agricole Says
The yen may drop to the weakest level since January 2008 versus the dollar, spurred by comments tomorrow from Bank of Japan Governor Haruhiko Kuroda, according to Credit Agricole SA.
Japan’s currency slid to a six-year low last week, following its worst month since January 2013 in September, amid prospects for the BOJ to continue unprecedented monetary easing while the Federal Reserve weighs the timing of its first interest rate increase. Kuroda will hold a news conference after a two-day meeting with his board that starts today. He reiterated on Oct. 3 that he doesn’t think a weak yen is a minus for the Japanese economy overall.
“If Kuroda again states there are few demerits to a weaker yen, it would be a catalyst for more yen selling,” said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo. “I expect the yen to make a run at 111.50 this week.”
That level marks the 50 percent retracement from the yen’s August 1998 low of 147.66 to its post-World War II high of 75.35 in October 2011, according to Fibonacci technical analysis.
Longer term, the yen will drop toward 112.63 per dollar, the 76.4 percent retracement of the 2007 low and the 2011 high, Saito said. The yen traded at 109.65 per dollar as of 11:34 a.m. in Tokyo, after touching 110.09 on Oct. 1, the weakest since August 2008. It tumbled 5.1 percent last month.
Policy Divergence
The BOJ will increase stimulus this year, according to about a quarter of the 33 economists surveyed by Bloomberg News between Sept. 26 and Oct. 2. An additional 42 percent expect an expansion of quantitative easing some time after the turn of the year. All the respondents expect the central bank to leave policy settings unchanged tomorrow.
Traders see a 76 percent chance the Fed will raise its target for overnight lending between banks by its September 2015 meeting, in what would be the first increase since 2006, futures data compiled by Bloomberg showed yesterday. That’s up from 73 percent odds seen on Sept. 1. Fibonacci analysis, based on the work of 13th century mathematician Leonardo of Pisa, is founded on the theory that prices rise or fall by certain percentages after reaching a new high or low.
Goldman Says Not So Fast as BlackRock Sees Earlier Fed Increase
Goldman Sachs Group Inc. says investors shouldn’t rush to anticipate a rate increase from the Federal Reserve after jobs gains beat economist forecasts. BlackRock Inc. said it’ll happen sooner than expected.
“Not so fast,” Jan Hatzius, the chief economist at Goldman Sachs in New York wrote in a report dated yesterday. Labor-market slack will help keep the Fed from raising borrowing costs until the third quarter of next year, according to Hatzius. Goldman, which gets the largest share of revenue from trading among U.S. banks, is one of the 22 primary dealers that trade directly with the central bank.
“The Fed’s going to move faster than people think,” BlackRock’s chief investment officer for fundamental fixed income Rick Rieder said Oct. 3, reiterating an earlier view. “We have an economy today that’s going, we think, quite strong,” he said on Bloomberg Television’s “Market Makers” with Erik Schatzker and Stephanie Ruhle. The company’s $4.32 trillion in assets make it the world’s biggest money manager.
The division highlights the dilemma Fed Chair Janet Yellen faces over when to raise borrowing costs from the record low while growth is uneven. Ten-year U.S. yields have fallen more than half a percentage point during 2014 as investors sought the relative safety of government debt amid concern the economy is performing below its potential.
The U.S. added 248,000 jobs in September, the Labor Department reported Oct. 3, compared with 215,000 projected by a Bloomberg News survey of economists. The jobless rate fell to 5.9 percent from 6.1 percent.
Trader Expectations
While hiring picked up, reports on Oct. 1 showed U.S. manufacturing growth slowed in September and data on Oct. 3 showed wage growth stagnated.
The implied yield on 30-day federal funds futures expiring in October 2015 was 0.565 percent, indicating traders expect the central bank to increase the target for its main interest rate from the current range of zero to 0.25 percent by then.
“We are looking for the Fed hike to come in the third quarter of next year,” said Richard Kelly, senior rates strategist at Toronto-Dominion Bank in London. The market is trying to price in an earlier rate increase and “that strong employment report was helpful but we know the Fed is much more wary of broad-based measures. The wage data did disappoint and you only care about the labor market to the extent that it’s generating wage growth. If that’s delaying, it can keep the Fed on pause for a little bit longer.”
Benchmark Estimate
Fed officials in September boosted their median estimate for the benchmark for the end of 2015 to 1.375 percent, compared with 1.125 percent in June. They have kept their target for the rate that banks charge each other on overnight loans close to zero since December 2008. Last month, policy makers also trimmed their monthly bond purchases for a seventh straight time, staying on course to end the program this month. They kept their pledge to maintain interest rates near zero for a “considerable time” after the asset buying stops.
The Fed will probably keep the language in its statement after its next meeting Oct. 28-29, Goldman’s Hatzius wrote.Fed Bank of St. Louis President James Bullard said last month the October meeting would be a “natural juncture” for ending the pledge.For BlackRock, the threat of higher short-term yields means it prefers long-term Treasuries and municipal bonds in the U.S., Rieder said.
“We’ve been stubbornly adamant” in calling for an early rate increase, he said.
source: Bloomberg