BLBG: Dollar Rises as Debt Woes in Greece, Dubai Spur Safety Demand
By Yasuhiko Seki
Feb. 15 (Bloomberg) -- The dollar rose for a fourth day against the euro as debt problems in Greece and Dubai spurred speculation that the global economic recovery will falter.
The euro fell toward an nine-month low versus the dollar before a meeting today of European Union finance ministers that may provide details of a Greece bailout. The greenback rose versus 14 of the 16 most-active currencies after Zawya Dow Jones said yesterday Dubai World, the state-owned company seeking to restructure $22 billion of debt, may offer creditors 60 cents on the dollar after seven years.
“Concerns over the debt situation in Greece continue to serve as a key catalyst for the dollar’s rally against the euro,” said Tomohiro Nishida, a foreign-currency dealer at Chuo Mitsui Trust & Banking Co. “Renewed uncertainties over the credit market in Dubai are also supporting the dollar.”
The dollar rose to $1.3600 per euro as of 2:46 p.m. in Tokyo from $1.3632 in New York on Feb. 12, when it reached $1.3532, the strongest level since May 19. The euro was at 122.60 yen from 122.61 yen in New York. The dollar traded at 90.16 yen from 89.96 yen on Feb. 12.
European finance ministers will meet in Brussels under pressure from investors to spell out concrete measures to rescue Greece if the nation fails to convince markets it can control a swelling debt burden.
The European Central Bank is seeking tougher steps than most EU finance ministers for Greece’s budget-deficit cuts, the Handelsblatt newspaper reported yesterday, citing a draft EU document listing possible measures.
‘Worrying Signal’
“The lack of a resolution at the EU summit was already a worrying signal and if a final plan does not emerge this week, the euro will likely take another leg lower,” Gareth Berry, a strategist at UBS in Singapore, wrote in a client note.
Greece should be forced to leave the euro-area should its debts endanger the currency’s stability, 53 percent of Germans said in a poll, Bildzeitung reported.
Germany and other European Union members shouldn’t provide financial aid to Greece, 67 percent said in the Emnid poll of 503 people for the newspaper.
Dubai and Dubai World have not made an offer to creditors on the holding company’s debt restructuring, a spokeswoman for the emirate’s Department of Finance said yesterday, the same day U.K. Business Secretary Peter Mandelson said time is running out to resolve the issue.
The dollar approached its strongest level against the yen in more than one week before a report tomorrow that economists said will show an increase in the Federal Reserve Bank of New York’s general economic index. The manufacturing figure climbed to 18.0 in February from 15.92 in the previous month, according to the median estimate of 43 economists surveyed by Bloomberg.
Fed Rates
Fed Chairman Ben S. Bernanke said last week the central bank may raise the discount rate “before long” as economic stimulus measures are unwound.
Futures trading in Chicago last week showed a 49 percent chance that the Fed will raise its target lending rate by at least a quarter-percentage point by its September meeting, up from 43 percent a week ago.
The yen fell against the dollar for a second day after a Cabinet Office report today showed Japan’s gross domestic product deflator dropped 3 percent in the fourth quarter from a year earlier. The deflator is used to calculate economic growth adjusted for price changes. Japan’s economy expanded at an annual pace of 4.6 percent in the fourth quarter.
BOJ ‘Nowhere Near’ Exit
“While the Fed’s exit strategy is drawing close attention, the Bank of Japan and the ECB are nowhere near an exit,” said Masashi Nakamura, a Tokyo-based economist at Mizuho Research Institute Ltd. “This outlook will give the dollar some advantage over the yen and the euro.”
The Bank of Japan will start a two-day policy meeting on Feb. 17. The central bank is forecast to keep its benchmark interest rate at 0.1 percent through 2010, according to economists surveyed by Bloomberg.
Futures traders last week increased bets to a record level that the euro will decline against the dollar.
The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain was 57,152 on Feb. 9, compared with 43,741 a week earlier, figures from the Washington-based Commodity Futures Trading Commission show.
To contact the reporter on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net
