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 investors will embrace risk.
“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 depreciated 0.1 percent to $1.4603 at 11:43 a.m. in New York, from $1.4618 yesterday, when it rose to $1.4653, the highest level since Dec. 18. Japan’s currency weakened 0.3 percent to 91.23 per dollar, from 90.94. The yen slid 0.2 percent to 133.13 per euro, from 132.94.
The yen dropped against the rand and Mexican peso on speculation Japan’s investors borrowed in the currency to invest in higher-yielding markets overseas. The yen fell 1.1 percent to 12.32 against the rand and declined 0.6 percent to 6.84 per peso. Three-month rates of 4.57 percent in Mexico and 7.1 percent in South Africa exceed 0.33 percent for Japan.
Retail Advance
U.S. retail sales increased 2.7 percent last month after a revised 0.2 percent drop in July, the Commerce Department said today in Washington. 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.”
The yield on the 10-year Treasury note increased 0.03 percentage point to 3.45 percent. It touched 3.27 percent on Sept. 11, the lowest level since July 13.
Sterling slid to the lowest level since May against the euro after Bank of England Governor Mervyn King told lawmakers in London he 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.
Weaker Pound
The pound declined 0.8 percent to 88.88 pence per euro after earlier touching 88.95 pence, the weakest level since May 18. Britain’s currency dropped 1 percent to $1.6425.
Sterling may fall to $1.6354 in the “short term,” according to Jim Chorek, a technical strategist at UBS AG in Stamford, Connecticut. The level is the 61.8 percent retracement of its rally earlier this month from $1.6114 to $1.6742, he wrote in a report titled “Sterling Not Shining.”
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.
Norway’s krone appreciated as much as 0.2 percent to 8.6244 versus the euro and was later little changed at 8.6361 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.
German Sentiment
The euro earlier dropped versus the dollar 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.
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.
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 yesterday, recovering from its drop to a 2 1/2-year low of $1.2330 in the month after Lehman went bankrupt.
