BLBG: Dollar Rises From Near Nine-Month Low as U.S. Retail Sales Gain
By Oliver Biggadike and Ye Xie
Sept. 15 (Bloomberg) -- The dollar climbed from near a nine-month low versus the euro and advanced against the yen after a government report showed U.S. retail sales increased in August by the most in three years.
The U.S. currency gained against most of its major counterparts as the report added to optimism consumer spending will hasten the economy’s return to growth. Yields on 10-year Treasuries rose for a second day, making the U.S. assets more attractive. South Africa’s rand was the biggest winner versus the yen among the 16 most-traded currencies tracked by Bloomberg on speculation demand for higher-yielding assets will increase.
“It’s the first time for a long time that both the yields and the dollar go up in a reaction to good U.S. numbers,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. “The income picture and job picture should be better.”
The euro fell 0.2 percent to $1.4593 at 9:51 a.m. in New York, from $1.4618 yesterday, when it rose to $1.4653, the highest level since Dec. 18. The yen weakened 0.4 percent to 91.46 per dollar, from 90.94 yesterday. The yen slid 0.3 percent to 133.38 per euro, from 132.94.
U.S. retail sales increased 2.7 percent last month after a revised 0.2 percent drop in July, the Commerce Department said today. The median forecast of 73 economists in a Bloomberg News survey was for a 1.9 percent gain. Purchases excluding automobiles climbed 1.1 percent.
“The yen sold off, which is in line with what you’d expect from the risk-aversion trade,” said Sacha Tihanyi, a currency strategist in Toronto at Scotia Capital, a unit of Canada’s third-largest bank. “People are looking at the number and wondering where it’s coming from.”
Weaker Pound
The pound slid to the lowest level since May against the euro after Bank of England Governor Mervyn King said the bank may lower the rate paid to commercial lenders.
Norway’s krone appreciated as much as 0.2 percent to 8.6244 versus the euro and was later little changed at 8.6287 after Prime Minister Jens Stoltenberg’s Labor party-led coalition was re-elected. The krone traded at 5.9144 per dollar, compared with 5.9089 yesterday.
Stoltenberg’s Labor Party and its partners, the Socialist Left and the Center Party, secured 86 out of 169 seats in parliament, after 99.9 percent of the vote was counted.
The euro earlier dropped after the ZEW Center for European Economic Research said its index of German investor and analyst expectations rose to 57.7 this month, from 56.1 in August. Economists forecast a reading of 60, according to a Bloomberg News survey.
Sterling Versus Euro
The pound traded at 88.66 pence per euro, compared with 88.17 pence yesterday and 88.77 pence earlier, the weakest level since May 18. It declined 0.6 percent to $1.6490, from $1.6583 yesterday, after earlier rising to $1.6658.
King told lawmakers in London the Bank of England doesn’t want “reserves to be unnecessarily high” and is “looking at” lowering the rate it pays banks to deposit money with the central bank.
The Bank of England said last week it would maintain its 175 billion pound ($289 billion) asset-purchase program and kept its benchmark interest rate at 0.5 percent.
The pound rose earlier after the London-based Royal Institution of Chartered Surveyors said more surveyors reported a gain in British home values than a drop for the first time in two years.
Dollar Index
The Dollar Index, which tracks the greenback against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, rose for a second day. The gauge climbed 14 percent from Sept. 15, 2008, to its high this year on March 4, 2009, as investors sought the safety of U.S. assets following the collapse of Lehman Brothers Holdings Inc. The index since then fell by the same amount to 76.854 today as investors focused on deficits in the U.S. and near-zero interest rates.
U.S. authorities have rescued, taken over or helped to sell Bear Stearns Cos., Merrill Lynch & Co., American International Group Inc., Fannie Mae, Freddie Mac and Citigroup Inc.
President Barack Obama, speaking to Bloomberg News one year after the Lehman bankruptcy sent financial markets into turmoil, warned against cutting off government aid “so soon that the recovery doesn’t take flight.”
Writedowns and credit losses at the world’s biggest financial institutions since the start of 2007 climbed to more than $1.6 trillion, data compiled by Bloomberg show. The euro climbed to a nine-month high earlier this week, recovering from its drop to a 2 1/2-year low of $1.2330 in the month after Lehman went bankrupt.
Yellen on Economy
Federal Reserve Bank of San Francisco President Janet Yellen said policy makers must guard against inflation becoming too low rather than too high.
“We face an economy with substantial slack, prospects for only moderate growth and low and declining inflation,” Yellen said yesterday in a speech in San Francisco. Until the time comes to raise interest rates, “we need to defend our price stability goal on the low side and promote full employment.”
