BLBG: Dollar Gains on Speculation U.S. Companies Bringing Back Funds
By Ron Harui
Dec. 28 (Bloomberg) -- The dollar rose for the first time in four days against the yen on speculation U.S. companies are bringing back earnings on overseas assets before the year ends.
The U.S. currency also gained on speculation data tomorrow will show the world’s largest economy is recovering, giving the Federal Reserve more reason to end emergency stimulus measures. The yen fell against all of its 16 major counterparts as stocks climbed in Asia and Europe after a government report said Japan’s manufacturers raised output at the fastest pace in six months in November, damping demand for the currency as a haven.
“There seems to be last-minute repatriation by U.S. firms before year-end,” said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA. “This is helping to boost the dollar.”
The dollar rose 0.2 percent to 91.50 yen at 6:44 a.m. in New York, from 91.30 yen on Dec. 25. The U.S. currency was at $1.4402 per euro, compared with $1.4411. The euro traded at 131.77 yen, compared with 131.64 yen.
Property values in 20 metropolitan areas in the U.S. probably fell 7.1 percent in October from a year earlier, the smallest 12-month drop since 2007, according to a Bloomberg News survey of economists before a report tomorrow from S&P/Case- Shiller. The New York-based Conference Board’s consumer confidence index probably rose to 53 this month from 49.5 in November, a separate Bloomberg survey showed.
Fed Rate Bets
Futures on the Chicago Board of Trade showed a 55 percent chance on Dec. 25 the Fed will raise its target lending rate by at least a quarter-percentage point by its June meeting, up from 48 percent a day earlier. The central bank next meets to review borrowing costs on Jan. 28.
The U.S. currency may extend gains versus the yen on speculation that rising Treasury yields will increase returns on dollar-denominated assets. Ten-year yields were at the highest level in more than four months before the Treasury sells $44 billion in two-year notes today in the first of three auctions this week totaling a record-tying $118 billion.
“Medium- to long-term U.S. yields may rise further should this week’s U.S. economic data releases beat forecasts and Treasury auctions not attract sufficient demand,” said Masafumi Yamamoto, chief foreign-exchange strategist in Tokyo at Barclays Capital. “Hence, the dollar-yen may test its October high.”
The yield on the benchmark 10-year note rose four basis points, or 0.04 percentage point, to 3.84 percent, according to BGCantor Market Data. It earlier touched 3.85 percent, the highest since Aug. 10.
Dollar Index
The yen also weakened as gains in equities and signs of an improving Japanese economy boosted demand for higher-yielding assets.
Factory production in Japan rose 2.6 percent last month after climbing 0.5 percent in October, the Trade Ministry said today in Tokyo. The median estimate of 24 economists surveyed by Bloomberg News was for a 2.5 percent gain.
“This is being supported by the continued turnaround in their exports,” said David Cohen, an economist in Singapore at Action Economics, in a Bloomberg Television interview. “The yen is still under pressure.”
Exports to China and Asia rose in November for the first time since September 2008, according to a Finance Ministry report released last week. Shipments to Asia advanced 4.7 percent in November from a year earlier, while exports to China climbed 7.8 percent.
Stocks Rise
The Nikkei 225 Stock Average rose 1.3 percent and the MSCI World Index shares climbed 0.3 percent. Japan’s benchmark interest rate is 0.1 percent. Australia’s is 3.75 percent and New Zealand’s is 2.5 percent.
South Korea’s won advanced to its strongest level in more than a week after local companies won a $20 billion nuclear- power-plant contract from the United Arab Emirates.
“The Korean won jumped this morning due to the news of the nuclear plant order,” said Ko Yun Jin, a currency dealer with Kookmin Bank in Seoul. “It’s very big news for us, although it doesn’t provide dollar supply directly. It’s very good news for the Korean economy.”
The won strengthened 0.4 percent to 1,170.18 per dollar, according to data compiled by Bloomberg. It earlier touched 1,168.13, the strongest level since Dec. 17.
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net
