BLBG: Dollar Falls Toward 9-Month Low Against Euro on China Growth
By Yoshiaki Nohara and Ron Harui
Sept. 11 (Bloomberg) -- The dollar fell toward a nine-month low against the euro as reports showed China’s factory output and new lending gained last month by more than economists estimated, reducing demand for the U.S. currency as a refuge.
The yen strengthened for a second day against the euro on speculation Japanese exporters are repatriating earnings toward the end of the third quarter. The pound rose to a one-month high versus the dollar before a U.K. report that may show producer prices gained a second month. The euro headed for a weekly gain against the dollar on signs the recession in Europe is abating.
“Solid data in China show economic fundamentals are improving, weighing down on the dollar,” said Koji Fukaya, a senior currency strategist in Tokyo at Deutsche Bank AG. “Risk appetite is coming back.”
The dollar declined to $1.4614 per euro as of 1:42 p.m. in Tokyo from $1.4582 yesterday in New York. It earlier dropped to $1.4619, the weakest level since Dec. 18. The yen rose to 133.39 per euro from 133.76. Japan’s currency traded at 91.28 per dollar from 91.73. It touched 91.22, the strongest since Feb. 13.
The pound gained to $1.6709 from $1.6651 yesterday. It’s at the highest level since Aug. 10. The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners including the euro, yen and pound, fell to as low as 76.612, the weakest level since September 2008.
China Production, Lending
China’s industrial production gained 12.3 percent in August from a year earlier, the statistics bureau reported today in Beijing. Economists surveyed by Bloomberg News forecast an 11.8 increase. New lending unexpectedly increased in August and money supply rose by a record. Banks extended 410.4 billion yuan ($60.1 billion) of local-currency loans, up from 355.9 billion yuan in July, the People’s Bank of China said today.
The yen advanced against all 16 major counterparts amid speculation Japanese companies are bringing back money earned abroad to take advantage of a tax break that went into effect this fiscal year.
“Japan’s exporters are bringing home their earnings, a typical move in September toward the end of the third quarter,” said Takashi Kudo, director of foreign-exchange sales at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp. “As a result, the yen is rising across the board.”
Rising Pound
The Japanese government announced earlier this year that it would waive taxes on repatriated profits from April 1 to help support the economy. Under previous laws, companies had to pay a combined 40 percent tax on overseas earnings.
The pound was poised for a second weekly advance versus the dollar as the price of goods at U.K. factory gates climbed 0.3 percent in August, the same pace as in July, according to a Bloomberg News survey of economists. The Office for National Statistics will release the data today in London.
“Sentiment is emerging that the recession in economies around the world, including the U.K.’s, is ending,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “Risk-taking appetite is benefiting the pound.”
The Bank of England yesterday held interest rates at 0.5 percent and kept its bond-buying program unchanged in a sign policy makers believe the economy is recovering. The decision by the BOE’s nine-member Monetary Policy Committee, led by Governor Mervyn King, was forecast by all 35 economists in another survey.
Italian Industrial Production
The euro headed for a weekly gain against 12 of its 16 major counterparts as Italian industrial production may have gained 0.4 percent in July after a 1.2 percent decline in June, according to a Bloomberg News survey of economists. The national statistics office will release the data in Rome today.
German exports, adjusted for working days and seasonal changes, rose 2.3 percent in July from June, the Federal Statistics Office said in Wiesbaden on Sept. 8.
“The euro-zone economy is gradually recovering,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “The euro will probably trade in a firm manner.”
The yield advantage of two-year German bunds over similar- maturity Treasuries widened to 0.34 percentage point today from 0.16 percentage point on Sept. 4.
