BLBG: Dollar, Yen Fall as Recovery Signs Spur Higher-Yield Demand
By Anna Rascouet
Nov. 2 (Bloomberg) -- The dollar and yen declined against the euro as evidence the global economic recovery is gaining momentum increased demand for higher-yielding assets.
Australia’s currency climbed versus most of its 16 major counterparts as Treasurer Wayne Swan said the economic outlook was improved, adding to speculation the Reserve Bank will raise its 3.25 percent cash rate target tomorrow. The pound dropped for the first time in six days versus the euro on bets the Bank of England will extend its bond-buying program this week.
“The markets have taken a step back and said hold on, the global economy is recovering and we’re not in an environment where risk aversion is going to shoot up on a sustained basis,” said Daragh Maher, London-based deputy head of global currency strategy at Calyon, the investment-banking arm of Credit Agricole SA.
The dollar slid 0.4 percent to $1.4780 per euro at 7:20 a.m. in New York, from $1.4719 yesterday. The euro appreciated 0.2 percent to 132.90 yen, from 132.61. The dollar decreased 0.2 percent to 89.91 yen, from 90.09.
Australia’s dollar rose 0.5 percent to 90.44 U.S. cents as Swan told reporters in Canberra that the economy will expand 1.5 percent in the 12 months ending June 30, 2010, compared with a May prediction of a 0.5 percent contraction.
An index measuring the weighted average of prices for established houses in eight Australian cities climbed 4.2 percent in the third quarter, the Australian Bureau of Statistics said in Sydney.
March to Parity
The Aussie is heading for parity against its U.S. counterpart, according to Citigroup Inc., Calyon, Barclays Capital and National Australia Bank Ltd. The currency soared 36 percent versus the greenback in the past 12 months, more than any other major currency tracked by Bloomberg.
The yen declined against the euro as the improved outlook for the Chinese economy sapped demand for the Japanese currency as a refuge.
The Shanghai Composite Index rose 2.7 percent after a purchasing managers’ index released by HSBC Holdings Plc today showed China’s manufacturing expanded in October at the fastest pace in 18 months. The HSBC index rose to a seasonally adjusted 55.4, from 55 in September, an e-mailed statement showed.
China’s own Purchasing Managers’ Index increased to a seasonally adjusted 55.2 last month, from 54.3, the Federation of Logistics and Purchasing said yesterday in Beijing.
‘Bright News’
“There is bright news about economies worldwide, as China’s PMI suggests the recovery in the nation’s economy is picking up,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. Ltd. in Tokyo. “It’s mildly positive for risk appetite and negative for the dollar and the yen.”
The pound fell for a second day against the dollar and snapped a five-day gain versus the euro on speculation the Bank of England will extend its bond-buying program this week to revive Britain’s shrinking economy and Royal Bank of Scotland said it may be forced to sell more assets than planned.
Sterling depreciated to beyond 90 pence per euro for the first time since Oct. 28. Policy makers will expand asset purchases by 50 billion pounds ($82 billion) to 225 billion pounds on Nov. 5, according to the median forecast of 48 economists in a Bloomberg survey. The view of economists may not be adequately reflected in the currency’s price after gains last week, UBS AG said today.
The yen climbed earlier on reduced demand for higher- yielding assets after the 101-year-old commercial lender CIT Group Inc. listed $71 billion in assets and $65 billion in debt in its Chapter 11 filing in U.S. Bankruptcy Court in Manhattan.
Fujii on Yen
Japanese Finance Minister Hirohisa Fujii said events in the U.S. are causing the yen to rise against the dollar and he’s watching currency movements closely.
Low interest rates in the U.S. and the bankruptcy filing of CIT Group are among the reasons Japan’s currency is rising against the dollar, Fujii told reporters in Tokyo today.
U.S. taxpayers probably won’t recoup much, if any, of the $2.3 billion in government funds that went to CIT Group, Treasury Department spokesman Andrew Williams said in an e- mailed statement.
“The U.S. financial system is far from being in perfect health,” said Mitsuru Saito, chief economist in Tokyo at Tokai Tokyo Securities Co. in Tokyo.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback versus some of the U.S.’s biggest trading partners, fell 0.2 percent.
