BLBG: Dollar Rises on Recovery Signs as Greek Government Bonds Slide
By Justin Carrigan and Matthew Brown
Dec. 15 (Bloomberg) -- The dollar rose to the highest level in more than two months against the euro on speculation the U.S. economic recovery will prompt the Federal Reserve to start reducing stimulus measures. Greek bonds fell for a second day.
The dollar strengthened against 14 of the 16 most-traded currencies tracked by Bloomberg at 10:36 a.m. in London, advancing 0.8 percent compared with the euro. The yield on the Greek 10-year bond climbed 16 basis points. The MSCI World Index of 23 developed nations’ stocks fell 0.4 percent.
“The market is under-estimating growth in the U.S., and data are suggesting the economic conditions will allow the Fed to soon change the language,” said John Stopford, who oversees $12 billion at Investec Asset Management Ltd. in London. “We are positive about the dollar in the near-term.”
While none of the 97 economists surveyed by Bloomberg predicts the Fed will begin raising interest rates at meetings today and tomorrow, investors anticipate the central bank will soon begin to drain some of the $12 trillion it has pumped into the economy. Signs of recovery from the first global recession since World War II are increasing, and a Fed report today may show industrial production rose 0.5 percent last month, according to a separate survey.
The euro dropped to $1.4539, the weakest level since Oct. 2, before trading 0.8 percent lower at $1.4545. The pound gained against the euro for a fourth straight day, the longest streak in almost a month, as a report showed U.K. consumer prices rose 1.9 percent, more than economists forecast, in November.
Greek Deficit
Greek government bonds dropped as investors bet Prime Minister George Papandreou will fail to cut the country’s deficit to the European Union’s required level, below 3 percent of gross domestic product, by 2013. The yield on the 10-year note rose to 5.63 percent, widening the premium investors demand to hold the securities instead of German bunds by 17 basis points to 246 basis points.
The MSCI World fell for the first time in three days. Europe’s Dow Jones Stoxx 600 Index fluctuated between gains and losses, as the Athens Stock Exchange General Index fell 1.9 percent, the most among 18 western European benchmarks. National Bank of Greece SA, the nation’s biggest lender, slipped 3.5 percent.
The MSCI Asia Pacific Index retreated 0.7 percent. China Vanke Co., the nation’s biggest listed developer, slid 2.5 percent after the Xinhua News Agency said the government will target “excessive” property prices.
U.S. Futures
Futures on the Standard & Poor’s 500 Index declined 0.3 percent, indicating the benchmark gauge for U.S. equities may retreat from yesterday’s 14-month high.
The MSCI Emerging Markets Index fell 0.4 percent. Dubai’s DFM Index was 0.1 percent lower after rising 10.4 percent yesterday following Abu Dhabi’s pledge to provide $10 billion to help prevent a default by Nakheel PJSC.
Gold for immediate delivery fell 0.8 percent to $1,117.75 an ounce in London while copper for delivery in three months was little changed at $6,900 a metric ton on the London Metal Exchange, down $13.
To contact the reporters on this story: Justin Carrigan in London at jcarrigan@bloomberg.net;
