BLBG: Dollar Falls as Signs of Global Recovery Spur Demand for Yield
Sept. 22 (Bloomberg) -- The dollar weakened for the first time in three days against the euro as signs the global economy is recovering spurred investors to buy higher-yielding assets.
The greenback fell versus 15 of the 16 major currencies as most Asian stocks rose after the Asian Development Bank said regional economies will expand at a faster-than-expected pace this year, boosting demand for emerging-market investments. New Zealand’s dollar rose toward a six-week high against the yen after the nation’s current-account deficit shrank to the narrowest in more than four years.
“The economies are recovering, but not super strong,” Peter Redward, head of Asian emerging-markets research at Barclays Plc in Singapore, said in a Bloomberg Television interview. “Within this region, we still like to remain long risk-appetite plays, so Korea, India and Indonesia are our top picks” against the dollar, he said.
The U.S. currency dropped to $1.4712 per euro as of 6:10 a.m. in London from $1.4680 yesterday in New York. It declined to 91.73 yen from 91.93 yen and weakened to $1.6233 per pound from $1.6217. The yen was little changed at 134.96 versus the euro from 134.96.
New Zealand’s dollar strengthened 1.2 percent to 65.76 yen, after earlier climbing to 65.89 yen, the highest level since Aug. 10. The so-called kiwi rose 1.4 percent to 71.69 U.S. cents and touched the strongest in more than a year. Australia’s dollar advanced 0.7 percent to 86.91 cents.
ADB Report
Most Asian currencies gained as the ADB said in a report today that Asia, excluding Japan, will grow 3.9 percent in 2009, faster than a March estimate of 3.4 percent. Growth may strengthen in 2010 to 6.4 percent, the ADB said.
The region is leading the world’s emergence from the deepest recession since the 1930s after governments boosted spending, cut taxes and slashed interest rates, averting a spiral into a repeat of the Great Depression. Withdrawing stimulus measures too early may derail the global recovery and lead to a protracted slowdown, the ADB said.
China’s imports of coal more than tripled in August from a year earlier, reaching 11.77 million metric tons of the fuel, data from the customs office showed today. The nation’s copper imports more than doubled from a year earlier.
The South Korean won rose 0.1 percent to 1,203.15 per dollar, while the Indonesian rupiah was little changed at 9,695.
The U.S. currency also weakened on speculation that the Group-of-20 leaders meeting in Pittsburgh on Sept. 24-25 will call for gains in other currencies to help reduce global trade imbalances.
‘Facilitate Global Adjustment’
Policy makers need to promote a “sustained growth track and facilitate global adjustment, as well as structural reform which will need to be undertaken in both deficit and surplus countries,” Dimitri Soudas, a spokesman for Canadian Prime Minister Stephen Harper, told reporters yesterday in Ottawa.
“There’s talk that world leaders may seek to address the U.S. imbalances,” said Masashi Kurabe, head of currency sales and trading in Hong Kong at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s biggest publicly traded bank. “This may lead to weakness in the dollar.”
The U.S. trade deficit widened in July and imports gained by a record 4.7 percent, the Commerce Department said in Washington on Sept. 10. The gap between imports and exports increased 16 percent, the most in more than a decade.
The Dollar Index, which the ICE uses to track the dollar against the currencies of six major U.S. trading partners including the euro and the yen, fell 0.3 percent to 76.558.
New Zealand’s dollar rose for a second day versus the yen after Statistics New Zealand said the current-account deficit shrank to NZ$10.61 billion ($7.57 billion) in the 12 months ended June 30, from NZ$14.57 billion in the year through March. The median estimate in a Bloomberg survey was for a NZ$13.3 billion shortfall.
New Zealand
The annual deficit was 5.9 percent of gross domestic product, less than the 7.4 percent forecast by economists, and the least since the period ended September 2004.
“That’s the best number since September 2004 in GDP terms -- a significant improvement,” said Imre Speizer, a market strategist at Westpac Banking Corp. in Wellington. “Appetite for risk is pretty subdued and till we get out of the FOMC meeting it will be hard for the global rally to take another step up.”
Losses in the U.S. dollar were limited before a Federal Reserve meeting at which policy makers may signal an exit from economic stimulus measures, increasing the allure of assets in the world’s biggest economy.
The Fed will keep its target rate for overnight loans at a range of zero to 0.25 percent at its two-day policy meeting starting today, according to all 93 economists surveyed by Bloomberg News. Chairman Ben S. Bernanke and his colleagues may discuss how to wind down purchases of mortgage-backed securities.
“We wait to see how much the Fed acknowledges the improvement in the data recently,” said John Horner, a currency strategist in Sydney at Deutsche Bank AG, the world’s largest foreign-exchange trader. “The risk is that dollar short positions get taken off prior to that event.” A short position is a bet an asset will decline.
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net
