The dollar declined for the first time in three days after Federal Reserve officials said a worldwide economic slowdown may delay interest-rate increases, damping demand for the U.S. currency.
The Bloomberg Dollar Spot Index has lost 1.4 percent since reaching the highest since June 2010 on Oct. 3. Brazil’s real led currency gains as a voter poll indicated that opposition candidate Aecio Neves would win in the election runoff this month. Australia’s currency climbed from almost a four-year low as its biggest trading partner China reported better-than-forecast export growth and an unexpected pick-up in imports. China’s yuan rose as the central bank raised the currency’s reference rate.
“Some of the comments we’ve been seeing from Fed officials have a cautious tone,” Eric Viloria, a strategist at Wells Fargo & Co. in New York, said in a phone interview. “We’d expect some consolidations, if not corrections, of the dollar strength.”
The Bloomberg Dollar Spot Index dropped 0.4 percent to 1,065.31 as of 1:31 p.m. New York time. The index slid 0.8 percent last week after ending Oct. 3 at 1,078.65, the most since June 2010, based on closing prices.
Market Prices
The dollar weakened 0.3 percent to $1.2669 per euro. It also declined 0.2 percent to 107.40 yen and touched 107.06, the weakest level since Sept. 16. Japan’s currency was little changed at 136.13 per euro. The real rallied 1.8 percent to 2.3852 per dollar as a poll published on the website of IstoE magazine showed Neves leading President Dilma Rousseff 52.4 percent to 36.7 percent.
“The political debate tends to remain the main driver for currency trading,” Deives Ribeiro, a foreign-exchange manager at Fair Corretora de Cambio e Valores in Sao Paulo, said by phone. “Investors liked to see Neves ahead of Rousseff.”
The Aussie rose versus all except one of its 31 major counterparts as a Chinese report showed imports increased 7 percent last month from a year earlier, compared with the median estimate for a 2 percent decline. China is Australia’s largest trading partner.
The currency gained 0.9 percent to 87.65 U.S. cents after sliding to 86.43 cents on Oct. 3, the lowest since July 2010.
Yuan Strength
The yuan rose after the People’s Bank of China set the currency’s daily fixing 0.04 percent stronger at 6.1446 per dollar, the highest since Sept. 10. Governor Zhou Xiaochuan reiterated the need for “prudent” monetary policy in an Oct. 11 report to the International Monetary Fund in Washington. “The data should continue to support the relative strength in the renminbi, underpinned by a less resistant foreign-exchange policy and still attractive carry,” said Ju Wang, a currency strategist in Hong Kong at HSBC Holdings Plc, using the official name for the yuan.
The yuan climbed 0.08 percent to 6.1259 per dollar, China Foreign Exchange Trade System prices show. The currency earlier reached 6.1252, matching the highest level since March 7.
“If foreign growth is weaker than anticipated, the consequences for the U.S. economy could lead the Fed to remove accommodation more slowly than otherwise,” Fed Vice Chairman Stanley Fischer said Oct. 11 in a speech at the International Monetary Fund’s annual meetings in Washington.
Economic Outlook
The remarks, echoed by other Fed officials, highlighted mounting concern that the improving U.S. economy may struggle to withstand foreign weakness and a strengthening dollar.
Speaking on Oct. 10, U.S. Treasury Secretary Jacob J. Lew warned global policy makers against devaluing exchange rates for competitive advantage. The comment served as a reminder of the 2013 pact between finance chiefs not to use currencies as a policy tool for fear of triggering a spiral of devaluations and trade wars. Traders see a 25 percent chance the Fed will boost its benchmark rate by July 2015, down from 56 percent odds on Sept. 30, according to fed funds futures data compiled by Bloomberg. The target rate has been in a range of zero to 0.25 percent since December 2008 to support the economy.
“The Stanley Fischer comments are relevant, we’ve seen several comments from last couple of weeks regarding the potential impact of the dollar,” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “We’ve gone into Q4 and we’ve seen a big substantial move post the summer and the trend offered opportunities for people to put some money into the coffers. There’s a great degree of profit preservation as we go into Q4.”
Dollar Rally
The dollar and the yen have each rallied 1.8 percent in the past month, the best performers of 10 developed-nation currencies tracked by Bloomberg correlation-Weighted Indexes. The euro declined 0.8 percent, while Australia’s dollar tumbled 1.6 percent.
“While the downtrend is still in place for the euro and the Japanese yen, it looks to us like we’re in the midst of a correction, and that correction could last a bit longer,” Marc Chandler, the global head of currency strategy in New York at Brown Brothers Harriman & Co., said in an interview on Bloomberg Radio’s “Surveillance” with Tom Keene and Michael McKee.
Dollar a Buy After Record Winning Streak Snapped, Barclays Says
The end of the dollar’s longest streak of weekly gains in more than four decades is a signal to buy the U.S. currency, according to Barclays Plc.
The dollar slumped 0.9 percent in the five days ended Oct. 10, halting the longest weekly run of appreciation since the Bretton Woods agreement collapsed in 1971 and removed the dollar’s peg to gold. The yen rallied for the first time in nine weeks while the euro rose the most since April. “We would use short-term weakness in the U.S. dollar as an opportunity to buy the greenback at better levels,” London-based Lynnden Branigan, an analyst at the lender, wrote in a note to clients today.
The U.S. Dollar Index fell 0.5 percent as of 10:55 a.m. in New York. The greenback slid 0.4 percent against the euro and 0.3 percent versus the yen.
The dollar fell as policy makers expressed concern in minutes from the Federal Reserve’s September meeting that “anemic” global growth may derail the U.S. recovery. The central bank may slow its removal of monetary accommodation as a result, Fed Vice Chairman Stanley Fischer said Oct. 11. Barclays is betting Japan’s currency will strengthen toward 106.10 yen per dollar. The lender will then look to buy the U.S. currency in anticipation of a rise to first 110.10 and then about 110.70.
The British bank forecasts the euro climbing as high as $1.2805. Barclays projects the currency falling below $1.25 to confirm a move toward its target of about $1.2460.
Beijing Finds Agreement With IMF About Slowing China
Central bankers and International Monetary Fund officials agree with Beijing: a slowdown in the world’s second-largest economy is considered healthy and there’s no need for further monetary easing.
People’s Bank of China Governor Zhou Xiaochuan reiterated the need for “prudent” monetary policy amid steady economic growth and “mild” inflation in an Oct. 11 report to the IMF in Washington. His statement comes before government reports of September inflation and credit this week; August data showed the weakest industrial-output expansion since the global financial crisis and a 40 percent drop in broadest measure of new credit from a year earlier.
The slowing momentum in the Chinese economy is being seen as positive rather than alarming. Moderating growth will make it more sustainable, which will benefit both China and Asia, Malaysia’s Central Bank Governor Zeti Akhtar Aziz said in an interview with Bloomberg News on the weekend. The balance between expansion and structural reforms that China is seeking is right so far, Markus Rodlauer, deputy director of IMF’s Asia Pacific Department, said at an Oct. 10 briefing.
“China’s slowdown is a healthy correction, in many ways an engineered slowdown,” Jorge Mariscal, Chief Investment Officer for Emerging Markets at UBS AG, said in an interview in Washington on the weekend. “So far, this rate of decline of the economy isn’t so concerning to justify a very aggressive stimulus program, whether fiscal or monetary.”
Chinese policy makers are focusing on employment even as industrial production to property investment are slowing. Premier Li Keqiang said last week that China has already achieved its employment target for 2014. “Stamina and perseverance” are as important as speed in the economic policy mix, underlining why China has avoided stimulus measures including using monetary policy to help meet its growth target, he said.
Slowing Growth
Li said China still expects economic growth of about 7.5 percent this year in a weekend speech in Germany. The median forecast in a Bloomberg survey of economists from Sept. 18 to Sept. 23 is 7.3 percent this year. That would be the slowest pace since 1990.
The government won’t need to do “big stimulus” as the job market looks “pretty stable,” according to PBOC’s chief economist Ma Jun. “We need to avoid further increase in leveraging in some sectors, for example, real estate, some state-owned enterprises and local government financing vehicles,” Ma said on a panel at the Institute of International Finance annual meeting in Washington Oct. 11.
While the PBOC injected 500 billion yuan ($81 billion) of liquidity into the nation’s five largest commercial lenders last month, and eased mortgage policies to aid the housing market, it has refrained from a broader interest-rate cut. The benchmark one-year lending rate has been 6 percent since July 2012.
Brazil’s Real Leads Global Currency Gains as Neves Ahead in Poll
Brazil’s real led world currency gains as a voter poll indicated that opposition candidate Aecio Neves would defeat President Dilma Rousseff in the election runoff later this month.
The currency climbed 1.4 percent to 2.3951 per U.S. dollar at 9:43 a.m. in Sao Paulo in the best performance among 31 major currencies tracked by Bloomberg after rallying 1.2 percent last week. Swap rates, a gauge of expectations for changes in Brazil’s borrowing costs, declined four basis points, or 0.04 percentage point, to 11.93 percent today on the contract due in January 2016.
One-month implied volatility on options for the real, reflecting projected shifts in the currency as the Oct. 26 runoff approaches, increased to 24 percent, the highest in emerging markets. The real posted on Oct. 10 its first weekly gain since August on speculation a new government will revive Brazil’s economy and stem inflation.
“The political debate tends to remain the main driver for currency trading,” Deives Ribeiro, a foreign-exchange manager at Fair Corretora de Cambio e Valores in Sao Paulo, said by phone. “Investors liked to see Neves ahead of Rousseff.”
Neves would have 52.4 percent of votes in the runoff, compared with 36.7 percent for Rousseff, according to a Sensus poll published on the website of IstoE magazine. The survey of 2,000 people Oct. 7-10 has a margin of error of plus or minus 2.2 percentage points. Ricardo Guedes, director of research firm Sensus, also conducts internal polls for the Neves campaign.
The real also rose as Marina Silva, who came in third in the first round of Brazil’s presidential election, announced yesterday her endorsement of Neves.
source: Bloomberg
The Bloomberg Dollar Spot Index has lost 1.4 percent since reaching the highest since June 2010 on Oct. 3. Brazil’s real led currency gains as a voter poll indicated that opposition candidate Aecio Neves would win in the election runoff this month. Australia’s currency climbed from almost a four-year low as its biggest trading partner China reported better-than-forecast export growth and an unexpected pick-up in imports. China’s yuan rose as the central bank raised the currency’s reference rate.
“Some of the comments we’ve been seeing from Fed officials have a cautious tone,” Eric Viloria, a strategist at Wells Fargo & Co. in New York, said in a phone interview. “We’d expect some consolidations, if not corrections, of the dollar strength.”
The Bloomberg Dollar Spot Index dropped 0.4 percent to 1,065.31 as of 1:31 p.m. New York time. The index slid 0.8 percent last week after ending Oct. 3 at 1,078.65, the most since June 2010, based on closing prices.
Market Prices
The dollar weakened 0.3 percent to $1.2669 per euro. It also declined 0.2 percent to 107.40 yen and touched 107.06, the weakest level since Sept. 16. Japan’s currency was little changed at 136.13 per euro. The real rallied 1.8 percent to 2.3852 per dollar as a poll published on the website of IstoE magazine showed Neves leading President Dilma Rousseff 52.4 percent to 36.7 percent.
“The political debate tends to remain the main driver for currency trading,” Deives Ribeiro, a foreign-exchange manager at Fair Corretora de Cambio e Valores in Sao Paulo, said by phone. “Investors liked to see Neves ahead of Rousseff.”
The Aussie rose versus all except one of its 31 major counterparts as a Chinese report showed imports increased 7 percent last month from a year earlier, compared with the median estimate for a 2 percent decline. China is Australia’s largest trading partner.
The currency gained 0.9 percent to 87.65 U.S. cents after sliding to 86.43 cents on Oct. 3, the lowest since July 2010.
Yuan Strength
The yuan rose after the People’s Bank of China set the currency’s daily fixing 0.04 percent stronger at 6.1446 per dollar, the highest since Sept. 10. Governor Zhou Xiaochuan reiterated the need for “prudent” monetary policy in an Oct. 11 report to the International Monetary Fund in Washington. “The data should continue to support the relative strength in the renminbi, underpinned by a less resistant foreign-exchange policy and still attractive carry,” said Ju Wang, a currency strategist in Hong Kong at HSBC Holdings Plc, using the official name for the yuan.
The yuan climbed 0.08 percent to 6.1259 per dollar, China Foreign Exchange Trade System prices show. The currency earlier reached 6.1252, matching the highest level since March 7.
“If foreign growth is weaker than anticipated, the consequences for the U.S. economy could lead the Fed to remove accommodation more slowly than otherwise,” Fed Vice Chairman Stanley Fischer said Oct. 11 in a speech at the International Monetary Fund’s annual meetings in Washington.
Economic Outlook
The remarks, echoed by other Fed officials, highlighted mounting concern that the improving U.S. economy may struggle to withstand foreign weakness and a strengthening dollar.
Speaking on Oct. 10, U.S. Treasury Secretary Jacob J. Lew warned global policy makers against devaluing exchange rates for competitive advantage. The comment served as a reminder of the 2013 pact between finance chiefs not to use currencies as a policy tool for fear of triggering a spiral of devaluations and trade wars. Traders see a 25 percent chance the Fed will boost its benchmark rate by July 2015, down from 56 percent odds on Sept. 30, according to fed funds futures data compiled by Bloomberg. The target rate has been in a range of zero to 0.25 percent since December 2008 to support the economy.
“The Stanley Fischer comments are relevant, we’ve seen several comments from last couple of weeks regarding the potential impact of the dollar,” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “We’ve gone into Q4 and we’ve seen a big substantial move post the summer and the trend offered opportunities for people to put some money into the coffers. There’s a great degree of profit preservation as we go into Q4.”
Dollar Rally
The dollar and the yen have each rallied 1.8 percent in the past month, the best performers of 10 developed-nation currencies tracked by Bloomberg correlation-Weighted Indexes. The euro declined 0.8 percent, while Australia’s dollar tumbled 1.6 percent.
“While the downtrend is still in place for the euro and the Japanese yen, it looks to us like we’re in the midst of a correction, and that correction could last a bit longer,” Marc Chandler, the global head of currency strategy in New York at Brown Brothers Harriman & Co., said in an interview on Bloomberg Radio’s “Surveillance” with Tom Keene and Michael McKee.
Dollar a Buy After Record Winning Streak Snapped, Barclays Says
The end of the dollar’s longest streak of weekly gains in more than four decades is a signal to buy the U.S. currency, according to Barclays Plc.
The dollar slumped 0.9 percent in the five days ended Oct. 10, halting the longest weekly run of appreciation since the Bretton Woods agreement collapsed in 1971 and removed the dollar’s peg to gold. The yen rallied for the first time in nine weeks while the euro rose the most since April. “We would use short-term weakness in the U.S. dollar as an opportunity to buy the greenback at better levels,” London-based Lynnden Branigan, an analyst at the lender, wrote in a note to clients today.
The U.S. Dollar Index fell 0.5 percent as of 10:55 a.m. in New York. The greenback slid 0.4 percent against the euro and 0.3 percent versus the yen.
The dollar fell as policy makers expressed concern in minutes from the Federal Reserve’s September meeting that “anemic” global growth may derail the U.S. recovery. The central bank may slow its removal of monetary accommodation as a result, Fed Vice Chairman Stanley Fischer said Oct. 11. Barclays is betting Japan’s currency will strengthen toward 106.10 yen per dollar. The lender will then look to buy the U.S. currency in anticipation of a rise to first 110.10 and then about 110.70.
The British bank forecasts the euro climbing as high as $1.2805. Barclays projects the currency falling below $1.25 to confirm a move toward its target of about $1.2460.
Beijing Finds Agreement With IMF About Slowing China
Central bankers and International Monetary Fund officials agree with Beijing: a slowdown in the world’s second-largest economy is considered healthy and there’s no need for further monetary easing.
People’s Bank of China Governor Zhou Xiaochuan reiterated the need for “prudent” monetary policy amid steady economic growth and “mild” inflation in an Oct. 11 report to the IMF in Washington. His statement comes before government reports of September inflation and credit this week; August data showed the weakest industrial-output expansion since the global financial crisis and a 40 percent drop in broadest measure of new credit from a year earlier.
The slowing momentum in the Chinese economy is being seen as positive rather than alarming. Moderating growth will make it more sustainable, which will benefit both China and Asia, Malaysia’s Central Bank Governor Zeti Akhtar Aziz said in an interview with Bloomberg News on the weekend. The balance between expansion and structural reforms that China is seeking is right so far, Markus Rodlauer, deputy director of IMF’s Asia Pacific Department, said at an Oct. 10 briefing.
“China’s slowdown is a healthy correction, in many ways an engineered slowdown,” Jorge Mariscal, Chief Investment Officer for Emerging Markets at UBS AG, said in an interview in Washington on the weekend. “So far, this rate of decline of the economy isn’t so concerning to justify a very aggressive stimulus program, whether fiscal or monetary.”
Chinese policy makers are focusing on employment even as industrial production to property investment are slowing. Premier Li Keqiang said last week that China has already achieved its employment target for 2014. “Stamina and perseverance” are as important as speed in the economic policy mix, underlining why China has avoided stimulus measures including using monetary policy to help meet its growth target, he said.
Slowing Growth
Li said China still expects economic growth of about 7.5 percent this year in a weekend speech in Germany. The median forecast in a Bloomberg survey of economists from Sept. 18 to Sept. 23 is 7.3 percent this year. That would be the slowest pace since 1990.
The government won’t need to do “big stimulus” as the job market looks “pretty stable,” according to PBOC’s chief economist Ma Jun. “We need to avoid further increase in leveraging in some sectors, for example, real estate, some state-owned enterprises and local government financing vehicles,” Ma said on a panel at the Institute of International Finance annual meeting in Washington Oct. 11.
While the PBOC injected 500 billion yuan ($81 billion) of liquidity into the nation’s five largest commercial lenders last month, and eased mortgage policies to aid the housing market, it has refrained from a broader interest-rate cut. The benchmark one-year lending rate has been 6 percent since July 2012.
Brazil’s Real Leads Global Currency Gains as Neves Ahead in Poll
Brazil’s real led world currency gains as a voter poll indicated that opposition candidate Aecio Neves would defeat President Dilma Rousseff in the election runoff later this month.
The currency climbed 1.4 percent to 2.3951 per U.S. dollar at 9:43 a.m. in Sao Paulo in the best performance among 31 major currencies tracked by Bloomberg after rallying 1.2 percent last week. Swap rates, a gauge of expectations for changes in Brazil’s borrowing costs, declined four basis points, or 0.04 percentage point, to 11.93 percent today on the contract due in January 2016.
One-month implied volatility on options for the real, reflecting projected shifts in the currency as the Oct. 26 runoff approaches, increased to 24 percent, the highest in emerging markets. The real posted on Oct. 10 its first weekly gain since August on speculation a new government will revive Brazil’s economy and stem inflation.
“The political debate tends to remain the main driver for currency trading,” Deives Ribeiro, a foreign-exchange manager at Fair Corretora de Cambio e Valores in Sao Paulo, said by phone. “Investors liked to see Neves ahead of Rousseff.”
Neves would have 52.4 percent of votes in the runoff, compared with 36.7 percent for Rousseff, according to a Sensus poll published on the website of IstoE magazine. The survey of 2,000 people Oct. 7-10 has a margin of error of plus or minus 2.2 percentage points. Ricardo Guedes, director of research firm Sensus, also conducts internal polls for the Neves campaign.
The real also rose as Marina Silva, who came in third in the first round of Brazil’s presidential election, announced yesterday her endorsement of Neves.
source: Bloomberg