BLBG: Dollar Rises as Investors Reduce Short Positions Before Holiday
By Yoshiaki Nohara and Yasuhiko Seki
Nov. 10 (Bloomberg) -- The dollar rebounded from a two-week low against the euro on prospects investors moved before a U.S. public holiday to pare back bets the greenback will slide.
The euro weakened against the dollar and yen before data forecast to show German investor confidence fell for a second month. The pound dropped against all 16 major counterparts after a Fitch Ratings said the U.K. is at the most risk of losing its AAA status among major economies.
“Short-term players are moving to close out accumulated short positions on the dollar as they prepare for a public holiday in the U.S.,” said Kazutoshi Yasuda, general manager of the markets department in Tokyo at FX Prime Corp., a foreign- exchange unit of Japanese trading house Itochu Corp. “Trading volume has already started to dwindle in Asia.”
The dollar rose to $1.4979 per euro as of 6:43 a.m. in London from $1.4999 in New York yesterday, when it touched $1.5020, the lowest since Oct. 26. The euro dropped to 134.59 yen from 134.91 yen. The dollar fetched 89.85 yen from 89.93 yen.
The pound dropped to $1.6647 from $1.6759. It fell to 149.56 yen from 150.70 yen.
The U.K. rating faces risks because the country needs “the largest budget adjustment,” David Riley, head of global sovereign ratings at Fitch, said today in an e-mail. “Our stable rating outlook reflected our expectation that the U.K. government will articulate a stronger fiscal consolidation program next year.”
U.S. markets will be closed tomorrow for the Veterans Day holiday. A short position is a bet an asset’s price will fall.
The ZEW Center for European Economic Research in Mannheim will say its index of investor and analyst expectations dropped to 55 in November from 56 in October, according to the median estimate of economists in a Bloomberg News survey. ZEW releases the report, which aims to predict developments six months ahead, at 11 a.m. in Mannheim today.
Government data yesterday showed German industrial output rose more than economists had forecast as factories expanded production to meet export demand.
Dollar Index
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, rose 0.3 percent to 75.218. Yesterday, the gauge touched 74.930, the lowest level since August 2008.
“The dollar is being bought back as it became cheap,” said Susumu Kato, chief economist at Calyon Securities in Tokyo. “Its gains may be limited. The mainstream trend remains negative on the dollar.”
The euro also dropped on speculation government and central bank officials will try to curb its gains, which make European exports less competitive abroad.
“There is also concern that European policy makers may try to talk down the value of the euro once the currency climbs above the $1.50 mark just like they did the last time the single currency rallied above that level,” said Yousuke Hosokawa, a senior currency dealer in Tokyo at Chuo Mitsui Trust & Banking Co., a unit of Japan’s seventh-largest bank.
‘Pain Threshold’
BusinessEurope, the European employers’ federation, said the euro has reached a “pain threshold for industry” in the 16 nations using the currency as the region pulls out of the worst recession in six decades.
“I am deeply concerned about recent exchange-rate developments,” Juergen Thumann, head of the Brussels-based group, said yesterday in an e-mailed statement ahead of a meeting with European policy makers. “This is not good news for growth in Europe.”
European Central Bank President Jean-Claude Trichet has said a strong dollar is “extremely important” and Henri Guaino, an aide to French President Nicolas Sarkozy, on Oct. 20 called the euro at $1.50 a “disaster,” a day before the currency hit that level for the first time in 14 months.
China’s Data
Gains in the dollar were limited amid expectations official data from China will add to evidence the nation is leading the global economy out of recession.
Factory output probably rose 15.5 percent in October from a year earlier after gaining 13.9 percent in September, according to the median of economists’ estimates collected by Bloomberg. The statistics bureau is set to release the data tomorrow in Beijing.
“Growing optimism about the state of the Chinese economy will support demand for currencies of countries that produce commodity products, such as Australia,” said Toshiya Yamauchi, manager of the foreign-exchange margin-trading department at Ueda Harlow Ltd. in Tokyo.
China’s customs bureau will report tomorrow that exports fell 13 percent last month from a year earlier, according to another Bloomberg survey. That would be the slowest decline since December 2008.
President Barack Obama said he will bring up currency issues when he meets with China’s President Hu Jintao and Premier Wen Jiabao in Beijing next week, Reuters reported.
“Currency, along with a host of other issues, will come up, and I’m confident that both the United States and China can arrive at a broad set of policies that encourages trade that benefits both countries,” Obama said in an interview with Reuters yesterday.
Obama’s comments come in advance of his Nov. 12 departure for his first trip as president to Asia. He plans to make stops in Tokyo, Singapore, China and South Korea.
To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Yasuhiko Seki in Tokyo at Yseki5@bloomberg.net.
