BLBG: Dollar Gains as Signs Recovery Is Slowing Spurs Safety Demand
By Yoshiaki Nohara and Ron Harui
Jan. 12 (Bloomberg) -- The dollar rose against higher- yielding currencies on speculation the global economy recovery may be slowing, spurring demand for the safety of the greenback.
The U.S. currency gained the most against South Africa’s rand, the Norwegian krone and the South Korean won after an official at China’s sovereign wealth fund said he saw an end to the dollar’s recent decline. Australia’s dollar weakened for the first time in three days after a government report showed home- loan approvals declined more than economists forecast.
“It’s natural to have worries over the sustainability of the rebound in the global economy,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow, Japan’s largest foreign-exchange broker. “This is causing some safe-haven buying of the dollar” against higher-yielding currencies, he said.
The dollar climbed to 7.4225 rand as of 2:10 p.m. in Tokyo from 7.3768 in New York yesterday, and rose to 5.6306 krone from 5.6088. The U.S. currency gained to 1,123.50 won from 1,119.95 yesterday, when it fell to 1,117.40 won, the lowest level since September 2008. The U.S. currency rose to $1.4484 per euro from $1.4513, and was at 92.24 yen from 92.09 yen. The euro bought 133.54 yen from 133.64 yen.
The greenback rose versus 15 of the 16 major currencies before a Labor Department report in two days that will show U.S. initial jobless claims rose to 435,000 in the week ended Jan. 9 from 434,000 the prior week, according to a Bloomberg News survey. U.S. employers cut 85,000 jobs in December after adding 4,000 the previous month, the Labor Department said on Jan. 8.
Dollar Index
The Dollar Index, which IntercontinentalExchange Inc. uses to track the dollar against currencies of six major U.S. trading partners including the euro and yen, rose 0.2 percent to 77.171.
The dollar is unlikely to weaken further this year, Peng Junming, an official at China Investment Corp.’s asset allocation and strategic research department, said in a speech today in Beijing, according to Market News International.
“The comments out of China supported the dollar as it was ending its decline,” said Nobuaki Kubo, vice president of foreign exchange in Tokyo at BBH Investment Services Inc., a unit of New York-based Brown Brothers Harriman & Co. “They were especially effective because there’s no other reasons to move the dollar.”
Australia’s dollar fell from a seven-week high versus the greenback after the statistics bureau said the number of loans granted to build or buy houses and apartments dropped 5.6 percent in November from October, when they declined 1.9 percent. The median estimate of economists surveyed by Bloomberg was for a 0.5 percent decline.
Source of Weakness
“The major source of weakness is the first-home buyers segment because they’re more interest-rate sensitive,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia. “These are good levels to get in as we see the Aussie going up to 98 cents in about six months.”
Australia’s currency slid to 92.75 U.S. cents from 92.96 cents, after rising to 93.26 cents yesterday, the strongest since Nov. 18.
Benchmark interest rates of 7 percent in South Africa, 3.75 percent in Australia, 2 percent in Korea and 1.75 percent in Norway, compared with as low as zero in the U.S., attract investors to borrow in the world’s largest economy and buy assets where returns are higher.
Asian Currencies
Asian currencies fell on speculation regional central banks will intervene to stem rallies this year that risk hurting a recovery in exports.
The won, Philippine peso and Indonesian rupiah all strengthened to the highest levels in at least 15 months yesterday after China reported a rebound in overseas sales, bolstering the outlook for global trade. Technical indicators that traders use to predict exchange-rate movements signaled the dollar was poised to climb against Asian currencies.
“The market has turned a bit cautious with talk that some regional central banks are intervening” to prevent appreciation, said Suresh Kumar Ramanathan, a foreign-exchange strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. “The moves yesterday were too fast for most regional currencies.”
The yen gained versus 12 of its 16 major counterparts as the nation’s companies may have repatriated earnings today after the three-day holiday.
“There’s talk that Japan’s exporters are repatriating profits,” said Takashi Kudo, director of foreign-exchange sales in Tokyo at NTT SmartTradeInc., a unit of Nippon Telegraph & Telephone Corp. “Stocks turned negative, reversing earlier gains, which is a yen-buying factor.”
To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.
