BLBG: Copper Drops in New York as Stockpiles Signal Gains Overdone
The dollar declined to the weakest level against the euro since before the bankruptcy of Lehman Brothers Holdings Inc., unwinding the gains posted by the greenback as investors sought safety amid a plunge in global financial markets.
The U.S. currency’s drop helped push gold to a record high and oil above $74 a barrel for the first time since August. The pound fell to its lowest level against the euro in more than six months on speculation the Bank of England will expand its asset- purchase program.
“The dollar is entering a period of seasonal weakness,” said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto. “Asian central banks continue to buy the euro.”
The U.S. currency depreciated 0.5 percent to $1.4854 per euro at 8:35 a.m. in New York, from $1.4773 yesterday, after trading at $1.4876, the weakest level since Aug. 22, 2008. The euro climbed 0.2 percent to 133.02 yen. The dollar depreciated 0.3 percent to 89.55 yen.
The dollar’s decline versus the euro accelerated after breaching $1.4850, a level last reached a week after Lehman collapsed on Sept. 15, 2008. The dollar reached an 18-month high of $1.2330 on Oct. 28, 2008, as investors bought Treasury bills to weather the worst global financial crisis since the Great Depression. The dollar lost 17 percent since then.
Record Gold
Gold rose to a record in London and New York on speculation that a weakening dollar and faster inflation will boost the appeal of precious metals. Platinum and palladium climbed to the highest price in more than a year and silver advanced to its costliest since July 2008. Futures on the Standard & Poor’s 500 Index expiring in December gained 0.2 percent to 1,073.20 after falling 0.3 percent earlier.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, dropped as much as 0.5 percent to 75.738, the lowest level since Aug. 11, 2008.
The euro rose against the dollar even after a report showed German investor confidence unexpectedly decreased in October for the first time in three months. Some investors used an initial drop in the euro to buy the currency, traders said.
The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations dropped to 56 from 57.7 last month. Economists had forecast an increase to 58.8, the median of 36 forecasts in a Bloomberg News survey showed.
‘Opportunity to Buy’
“A lot of people saw the weak ZEW as an opportunity to buy the euro,” said John Hydeskov, a senior analyst in Copenhagen at Danske Bank A/S. The dollar’s decline to $1.50 “is definitely within reach,” he said.
The pound weakened as the British Chambers of Commerce said the U.K.’s central bank should extend the 175 billion pound ($276 billion) asset-purchase program by 25 billion pounds, according to
“With quantitative easing, there’s still scope for some more,” David Frost, director general of the group, said in a Bloomberg Television interview. “This fragile recovery we’ve started to see really needs to be nurtured, so we’re saying perhaps another 25 billion pounds could be put into that.”
Prime Minister Gordon Brown said yesterday in a Bloomberg Television interview that ending Britain’s monetary and fiscal stimulus programs now would prolong the recession.
UBS AG cut its forecast for the pound today, citing the likelihood policy makers will expand asset purchases. The world’s second-largest currency trader expects it to trade at 94 pence per euro in one month, compared with 89 pence in a prior estimate. Sterling will probably weaken to $1.54 in the same period, compared with a previous estimate of $1.63, UBS said.
‘Gently Decline’
“In the absence of any major inflationary pressures, I don’t see where the pressure for a change in the monetary policy is for the U.K.,” said Simon Derrick, chief currency strategist in London at Bank of New York Mellon Corp., in an interview on Bloomberg Television. “I don’t see any reason for why the sterling can’t continue to gently decline against the euro.”
Consumer prices rose 1.1 percent from a year earlier, compared with 1.6 percent the previous month, the Office for National Statistics said today in London. The median forecast in a Bloomberg News survey of 31 economists was 1.3 percent. On the month, prices were unchanged for the first time in a September since records began in 1996.
New Zealand’s dollar rallied as much as 1.1 percent to 66.61 yen, the highest level since October 2008. The nation’s retail sales advanced 1.1 percent in August, Statistics New Zealand said today, compared with economists’ estimates of a 0.5 percent increase.
