The dollar touched a five-week low versus the yen as a bigger-than-forecast drop in retail sales fueled concern the U.S. economic expansion is faltering.
The Bloomberg Dollar Spot Index has declined 1.6 percent since reaching a more than four-year high on Oct. 3, when investors were betting that stronger growth than in Europe and Japan would lead to higher U.S. interest rates. Federal fund futures show the probability of a September U.S. rate increase fell to 30 percent, down from 46 percent yesterday and 67 percent two months ago, according to data compiled by Bloomberg. The euro rebounded, a day after Germany cut its growth forecast for this year and 2015.
“Looks like the hot potato of bad data has been passed from Germany to the United States,” Douglas Borthwick, head of foreign exchange at New York brokerage Chapdelaine & Co., said by phone. “The market was so convinced that strong dollar was going to be the next move.” The dollar declined 0.9 percent to 106.11 yen at 10:56 a.m. in New York and touched 105.23, the weakest level since Sept. 8. The U.S. currency fell 0.9 percent to $1.2767 per euro. Japan’s currency was little changed at 135.48 per euro. The Bloomberg Dollar Spot Index dropped 0.5 percent to 1,062.86. It reached 1,080.05 on Oct. 3.
Hedge funds and other large speculators raised their net bullish dollar bets versus eight of its major peers to a record 313,878 contracts as of Oct. 7, compared with 281,204 a week earlier, according to data from the Washington-based Commodity Futures Trading Commission.
Meeting Minutes
Brazil’s real led global currency declines on speculation voter polls due as soon as today will signal reduced chances President Dilma Rousseff is going to lose a runoff election that’s less than two weeks away. The currency lost 1.2 percent to 2.4303 per dollar, the biggest decrease among 31 major currencies.
Speculation the Fed will raise rates next year as the economy improves had led to a record rally in the U.S. currency. The advance started to reverse last week after minutes of the Sept. 16-17 Federal Open Market Committee meeting showed participants said growth “might be slower than they expected if foreign economic growth came in weaker than anticipated.” Officials also expressed concern that “further appreciation of the dollar.”
The 0.3 percent decrease in U.S. retail sales followed a 0.6 percent August gain that was the biggest in four months, Commerce Department figures showed. The median forecast of 81 economists surveyed by Bloomberg called for a 0.1 percent decline.
Global Growth
Germany’s Economy Ministry yesterday cut its 2014 forecast to 1.2 percent from 1.8 percent, and reduced its estimate for next year to 1.3 percent from 2 percent. China’s consumer prices rose the least in almost five years and factory-gate prices fell the most since April, official data showed today.
“The data is making people question the one-way rally the dollar has had,” Matt Derr, a foreign-exchange strategist at Credit Suisse Group AG, said by phone from New York. “A lot of that is because of the global growth concerns spilling into the U.S.” The euro has dropped 0.6 percent in the past three months according to Bloomberg Correlation Weighted Indexes, which track 10 developed-nation currencies. The dollar is up 6.4 percent and the yen has gained 1.4 percent.
Canadian Dollar Falls to Five Year Low as Oil Slide Continues
The Canadian dollar weakened to its lowest in more than five years as prices for crude oil dropped to levels that may endanger development of the nation’s largest export and curb business investment.
The currency fell against most of its major peers as dimming prospects for global demand and surging oil supply pushed the price for the international benchmark of crude oil below $85 a barrel, the least in four years. That is below one estimated level needed to make some oil sands projects profitable, according to figures cited in a report yesterday from the International Energy Agency.
“It’s all tied into the meltdown we’re having in crude at the moment,” Bipan Rai, director of foreign-exchange strategy at CIBC World Markets Inc., said by phone from Toronto. “Being a commodity currency, being one of the major exporters of crude globally, our domestic currency is tied to that.” The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, fell as much as 0.8 percent to C$1.1385 per U.S. dollar, the lowest since July 2009, before trading at C$1.1333 per U.S. dollar at 8:58 a.m. in Toronto. One loonie buys 88.23 U.S. cents.
Brazil’s Real Leads Global Currency Drops Before Voter Poll Data
Brazil’s real led global currency declines on speculation voter polls due as soon as today will signal reduced chances President Dilma Rousseff is going to lose a runoff election that’s less than two weeks away. The currency lost 1.2 percent to 2.4303 per dollar at 11:27 a.m. in Sao Paulo, the biggest decrease among 31 major currencies. Swap rates, a gauge of expectations for changes in local borrowing costs, rose 0.03 percentage point to 11.88 percent 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, rose to a three-year high as Ibope and Datafolha prepared to publish results of voter polls as soon as today. The real posted its first weekly gain since August last week on speculation Rousseff will lost her quest for a second four-year term after the nation fell into its first recession since 2009 and as inflation remains above target.
“Investors are focusing on what the next polls might show since Ibope and Datafolha are the two polling institutions with the best reputations,” Joao Paulo de Gracia Correa, a currency trader at Correparti Corretora de Cambio in Curitiba, Brazil, said in a telephone interview.
Rousseff will win 45 percent of total votes in the runoff compared with 44 percent for Senator Aecio Neves, according to a Vox Populi poll of 2,000 people taken Oct. 11-12 and published Oct. 13. The difference is within the margin of error of plus or minus 2.2 percentage points.
Neves Support
The currency rallied two days ago after a Sensus poll published Oct. 11 showed Neves with 52.4 percent support compared with 36.7 percent for Rousseff. Sensus also produces polls for Neves’s campaign, according to the company’s director, Ricardo Guedes. Vox Populi conducts surveys for Rousseff’s campaign, said a press officer who asked not to be identified because of internal policy.
To support the real, Brazil sold $197.5 million of currency swaps as part of an intervention program. The International Monetary Fund said on Oct. 7 that it sees Brazil’s economy expanding 0.3 percent this year, down from its July estimate of 1.3 percent. Brazil’s retail sales rose 1.1 percent in August from a month earlier after a prior 1 percent contraction, the national statistics agency reported today. The jump was the biggest since July 2013.
Standard & Poor’s cut Brazil’s credit rating in March for the first time in more than a decade on slower growth and what it said was deteriorating fiscal accounts. Five months later, Moody’s Investors Service raised the possibility that the South American nation may eventually be cut to junk when it changed its outlook to negative.
Russian Foreign-Exchange Demand Jumps 50% at Otkritie
Demand for foreign exchange at Russia’s Otkritie Bank (NMOS) surged by about 50 percent more than average last week after the ruble weakened to a record level versus the dollar, according to Artyom Zotov, the lender’s head of currency operations. The ruble depreciated to more than 40 to the U.S. currency last week for the first time amid the continuing Ukraine conflict, which prompted Russia’s central bank to spend more than $3 billion to shore up its value just this month.
“Since the end of last week, when the dollar went for 40 rubles and the euro to 51, public demand for currency in cash and non-cash rose by about 50 percent compared to the average over the last week,” Zotov said by phone today. Otkritie, Russia’s 13th-largest bank by assets, hasn’t seen “excessive demand” or lines of customers like in March when Russia annexed Crimea, he said.
Russians have been moving savings out of the ruble as President Vladimir Putin’s standoff with the U.S. and its allies worsens over the Ukraine conflict and political sanctions. The share of deposits in foreign currencies rose to 19.4 percent in August from 17.4 percent in December, according to central bank data.
“Money is not fleeing Russia,” Vladimir Osakovskiy, chief economist for Russia at Bank of America Corp., said in e-mailed comments. “They are just changing their denomination -- from rubles they become dollars -- and the main reason is expectations of further devaluation.”
Record Low
The ruble recovered from a record low 41.0475 per dollar earlier today, advancing to 40.6670 by the 6 p.m. close in Moscow. The currency weakened 0.1 percent to 51.8855 per euro.
The Bank of Russia, which has said it plans to adopt a free float by next year, currently allows the currency to trade within a 9-ruble-wide corridor.
When the currency weakens past the boundary’s limit, the bank spends $350 million in defending it before it shifts the band by 5 kopeks in an effort to smooth the retreat, according to its guidelines. It repeats the process each time the currency depreciates by 5 kopeks. The size of interventions is typically released with a two-day lag on the central bank’s website.
source: Bloomberg
The Bloomberg Dollar Spot Index has declined 1.6 percent since reaching a more than four-year high on Oct. 3, when investors were betting that stronger growth than in Europe and Japan would lead to higher U.S. interest rates. Federal fund futures show the probability of a September U.S. rate increase fell to 30 percent, down from 46 percent yesterday and 67 percent two months ago, according to data compiled by Bloomberg. The euro rebounded, a day after Germany cut its growth forecast for this year and 2015.
“Looks like the hot potato of bad data has been passed from Germany to the United States,” Douglas Borthwick, head of foreign exchange at New York brokerage Chapdelaine & Co., said by phone. “The market was so convinced that strong dollar was going to be the next move.” The dollar declined 0.9 percent to 106.11 yen at 10:56 a.m. in New York and touched 105.23, the weakest level since Sept. 8. The U.S. currency fell 0.9 percent to $1.2767 per euro. Japan’s currency was little changed at 135.48 per euro. The Bloomberg Dollar Spot Index dropped 0.5 percent to 1,062.86. It reached 1,080.05 on Oct. 3.
Hedge funds and other large speculators raised their net bullish dollar bets versus eight of its major peers to a record 313,878 contracts as of Oct. 7, compared with 281,204 a week earlier, according to data from the Washington-based Commodity Futures Trading Commission.
Meeting Minutes
Brazil’s real led global currency declines on speculation voter polls due as soon as today will signal reduced chances President Dilma Rousseff is going to lose a runoff election that’s less than two weeks away. The currency lost 1.2 percent to 2.4303 per dollar, the biggest decrease among 31 major currencies.
Speculation the Fed will raise rates next year as the economy improves had led to a record rally in the U.S. currency. The advance started to reverse last week after minutes of the Sept. 16-17 Federal Open Market Committee meeting showed participants said growth “might be slower than they expected if foreign economic growth came in weaker than anticipated.” Officials also expressed concern that “further appreciation of the dollar.”
The 0.3 percent decrease in U.S. retail sales followed a 0.6 percent August gain that was the biggest in four months, Commerce Department figures showed. The median forecast of 81 economists surveyed by Bloomberg called for a 0.1 percent decline.
Global Growth
Germany’s Economy Ministry yesterday cut its 2014 forecast to 1.2 percent from 1.8 percent, and reduced its estimate for next year to 1.3 percent from 2 percent. China’s consumer prices rose the least in almost five years and factory-gate prices fell the most since April, official data showed today.
“The data is making people question the one-way rally the dollar has had,” Matt Derr, a foreign-exchange strategist at Credit Suisse Group AG, said by phone from New York. “A lot of that is because of the global growth concerns spilling into the U.S.” The euro has dropped 0.6 percent in the past three months according to Bloomberg Correlation Weighted Indexes, which track 10 developed-nation currencies. The dollar is up 6.4 percent and the yen has gained 1.4 percent.
Canadian Dollar Falls to Five Year Low as Oil Slide Continues
The Canadian dollar weakened to its lowest in more than five years as prices for crude oil dropped to levels that may endanger development of the nation’s largest export and curb business investment.
The currency fell against most of its major peers as dimming prospects for global demand and surging oil supply pushed the price for the international benchmark of crude oil below $85 a barrel, the least in four years. That is below one estimated level needed to make some oil sands projects profitable, according to figures cited in a report yesterday from the International Energy Agency.
“It’s all tied into the meltdown we’re having in crude at the moment,” Bipan Rai, director of foreign-exchange strategy at CIBC World Markets Inc., said by phone from Toronto. “Being a commodity currency, being one of the major exporters of crude globally, our domestic currency is tied to that.” The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, fell as much as 0.8 percent to C$1.1385 per U.S. dollar, the lowest since July 2009, before trading at C$1.1333 per U.S. dollar at 8:58 a.m. in Toronto. One loonie buys 88.23 U.S. cents.
Brazil’s Real Leads Global Currency Drops Before Voter Poll Data
Brazil’s real led global currency declines on speculation voter polls due as soon as today will signal reduced chances President Dilma Rousseff is going to lose a runoff election that’s less than two weeks away. The currency lost 1.2 percent to 2.4303 per dollar at 11:27 a.m. in Sao Paulo, the biggest decrease among 31 major currencies. Swap rates, a gauge of expectations for changes in local borrowing costs, rose 0.03 percentage point to 11.88 percent 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, rose to a three-year high as Ibope and Datafolha prepared to publish results of voter polls as soon as today. The real posted its first weekly gain since August last week on speculation Rousseff will lost her quest for a second four-year term after the nation fell into its first recession since 2009 and as inflation remains above target.
“Investors are focusing on what the next polls might show since Ibope and Datafolha are the two polling institutions with the best reputations,” Joao Paulo de Gracia Correa, a currency trader at Correparti Corretora de Cambio in Curitiba, Brazil, said in a telephone interview.
Rousseff will win 45 percent of total votes in the runoff compared with 44 percent for Senator Aecio Neves, according to a Vox Populi poll of 2,000 people taken Oct. 11-12 and published Oct. 13. The difference is within the margin of error of plus or minus 2.2 percentage points.
Neves Support
The currency rallied two days ago after a Sensus poll published Oct. 11 showed Neves with 52.4 percent support compared with 36.7 percent for Rousseff. Sensus also produces polls for Neves’s campaign, according to the company’s director, Ricardo Guedes. Vox Populi conducts surveys for Rousseff’s campaign, said a press officer who asked not to be identified because of internal policy.
To support the real, Brazil sold $197.5 million of currency swaps as part of an intervention program. The International Monetary Fund said on Oct. 7 that it sees Brazil’s economy expanding 0.3 percent this year, down from its July estimate of 1.3 percent. Brazil’s retail sales rose 1.1 percent in August from a month earlier after a prior 1 percent contraction, the national statistics agency reported today. The jump was the biggest since July 2013.
Standard & Poor’s cut Brazil’s credit rating in March for the first time in more than a decade on slower growth and what it said was deteriorating fiscal accounts. Five months later, Moody’s Investors Service raised the possibility that the South American nation may eventually be cut to junk when it changed its outlook to negative.
Russian Foreign-Exchange Demand Jumps 50% at Otkritie
Demand for foreign exchange at Russia’s Otkritie Bank (NMOS) surged by about 50 percent more than average last week after the ruble weakened to a record level versus the dollar, according to Artyom Zotov, the lender’s head of currency operations. The ruble depreciated to more than 40 to the U.S. currency last week for the first time amid the continuing Ukraine conflict, which prompted Russia’s central bank to spend more than $3 billion to shore up its value just this month.
“Since the end of last week, when the dollar went for 40 rubles and the euro to 51, public demand for currency in cash and non-cash rose by about 50 percent compared to the average over the last week,” Zotov said by phone today. Otkritie, Russia’s 13th-largest bank by assets, hasn’t seen “excessive demand” or lines of customers like in March when Russia annexed Crimea, he said.
Russians have been moving savings out of the ruble as President Vladimir Putin’s standoff with the U.S. and its allies worsens over the Ukraine conflict and political sanctions. The share of deposits in foreign currencies rose to 19.4 percent in August from 17.4 percent in December, according to central bank data.
“Money is not fleeing Russia,” Vladimir Osakovskiy, chief economist for Russia at Bank of America Corp., said in e-mailed comments. “They are just changing their denomination -- from rubles they become dollars -- and the main reason is expectations of further devaluation.”
Record Low
The ruble recovered from a record low 41.0475 per dollar earlier today, advancing to 40.6670 by the 6 p.m. close in Moscow. The currency weakened 0.1 percent to 51.8855 per euro.
The Bank of Russia, which has said it plans to adopt a free float by next year, currently allows the currency to trade within a 9-ruble-wide corridor.
When the currency weakens past the boundary’s limit, the bank spends $350 million in defending it before it shifts the band by 5 kopeks in an effort to smooth the retreat, according to its guidelines. It repeats the process each time the currency depreciates by 5 kopeks. The size of interventions is typically released with a two-day lag on the central bank’s website.
source: Bloomberg