BLBG: Dollar Rises Against Higher-Yielding Currencies as Stocks Fall
By Lukanyo Mnyanda
Dec. 7 (Bloomberg) -- The dollar rose to its highest level in a month against the euro as stocks fell on speculation the worst of the global financial crisis hasn’t passed even after last week’s better-than-forecast U.S. employment data.
The dollar climbed most against higher-yielding currencies such as the New Zealand and Australian dollars as Dubai shares headed for their lowest close since July and every major stock market in Europe opened lower. The dollar jumped the most since June against the euro on Dec. 4 after a report showed U.S. employers cut the fewest jobs since the recession began, prompting traders to increase bets on rate increases. The yen rose as exporters took advantage of its biggest weekly decline against the dollar in a decade to repatriate earnings.
“We’re seeing more risk aversion emanating from the Middle East, that’s what is behind all this,” said Neil Jones, head of European hedge-fund sales in London at Mizuho Corporate Bank Ltd. “The dollar is being bought as a safe-haven currency. The risk aversion trade is back on.”
The dollar strengthened to $1.4808 per euro as of 10:15 a.m. in London, from $1.4858 in New York last week. It earlier traded at $1.4756, the strongest level since Nov. 4. The yen was at 133.29 per euro, from 134.54. It strengthened to 90 per dollar, from 90.56.
European stocks declined, with the Dow Jones Stoxx 600, a benchmark for the region, losing 0.6 percent. Dubai’s DFM General Index slid 5.8 percent. U.S. stock-index futures fell.
Australia, New Zealand
The dollar climbed for the fourth consecutive day against Australia and New Zealand’s currencies. The so-called Aussie bought 90.95 U.S. cents, from 91.47 cents last week. The New Zealand dollar was at 71.04 cents, from 71.63 cents.
Traders in the $3.2-trillion-a-day foreign-exchange market are paying the highest prices in more than a year to protect against a sudden rebound in the dollar after its worst annual performance since 2003. Renewed financial turmoil may boost the currency as investors buy U.S. assets such as Treasuries.
The yen advanced against its 16-most actively traded peers on speculation exporters were attracted by the currency’s slide last week. A weaker yen makes domestic goods less expensive abroad and increases the value of earnings made overseas.
“Exporters may start hedging substantially for the new fiscal year starting April 2010 sooner rather than later,” Tohru Sasaki, chief currency strategist in Tokyo at JPMorgan Chase & Co., wrote today in an e-mail to Bloomberg. “As exports increase steadily along with the global economic recovery, there is much incentive to sell the dollar above 90.”
Bernanke Speech
Large Japanese manufacturers expected the yen to average 94.50 per dollar in the 12 months to March 2010, according to the Bank of Japan’s quarterly Tankan survey released Oct. 1. The forecast in the previous report was for a rate of 94.85.
Gains by the dollar may be limited on speculation Federal Reserve Chairman Ben S. Bernanke will use a speech at the Economic Club of Washington today to signal that policy makers aren’t ready to raise rates. The Fed’s target for overnight loans is at a range of zero and 0.25 percent.
Employers in the U.S. cut 11,000 jobs in November, the fewest since the recession began, the Labor Department reported on Dec. 4. The median forecast of economists in a Bloomberg survey was for a reduction of 125,000 jobs. The unemployment rate fell to 10 percent from 10.2 percent.
Futures on the Chicago Board of Trade showed a 54 percent chance the Fed will raise the target lending rate by at least a quarter-percentage point at its June meeting, up from 32 percent a week ago.
“Bernanke will be cognizant of the risks of talking up the recovery too fast and will emphasize that we’re still some way from seeing significant levels of job creation,” said Jeremy Stretch, senior currency strategist at Rabobank International in London. “Central bankers are all walking a fine line.”
The Dollar Index, which IntercontinentalExchange Inc. uses to track the dollar against the currencies of six major U.S. trading partners, advanced 0.1 percent to 75.976.
To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.
