By Joseph Ciolli - Nov 20, 2012 9:58 PM GMT+0400
The yen dropped for a fifth day against the dollar even after Bank of Japan (8301) Governor Masaaki Shirakawa said the opposition party’s proposals to weaken the currency are unrealistic. Sweden’s krona declined as the country’s central bank was forecast to cut its benchmarkinterest rate twice by February to combat unemployment. The dollar gained versus the majority of its 16 most-traded peers as Federal Reserve Chairman Ben S. Bernanke warned that the U.S. risked falling back into recession unless lawmakers averted the so-called fiscal cliff.
The euro traded at almost a two-week high against its U.S. counterpart as the region’s finance ministers met in Brussels to discuss ways to plug a 15-billion euro ($19 billion) hole in Greece’s finances.
“It looks there will be some sort of agreement on Greece, but it’s unclear whether it’ll be a final resolution,” Brian Kim, a currency strategist at Royal Bank of Scotland Group Plc in Stamford,Connecticut, said in a telephone interview. “It’s not really giving people too much in terms of any new information, but they’re still expecting some form of progress or forward movement.”
The euro was little changed at $1.2809 at 12:53 p.m. New York time after rising to $1.2823, the highest level since Nov. 7. The shared currency traded in a range around its 200-day moving average for a second straight day. It rose 0.3 percent to 104.67 yen. Japan’s currency fell 0.4 percent to 81.75 per dollar.
Risk Currencies
Risk-correlated currencies such as the New Zealand dollar, Australian dollar and South African rand depreciated as commodities fell globally.
New Zealand’s dollar slipped 0.5 percent to 81.63 U.S. cents. The so-called Aussie decreased 0.4 percent to $1.0369. The South African rand fell 0.4 percent to 8.8607 per dollar after declining as much as 0.7 percent.
The Standard & Poor’s GSCI Index of raw materials declined 1.5 percent and crude-oil futures slipped 3.1 percent to $86.49 per barrel in New York.
The Swedish krona declined after SEB AB forecast in a report that the Riksbank will lower the country’s repo rate to 1 percent next month and further to 0.75 percent in February. The currency decreased 0.5 percent to 6.7584 per dollar.
‘Substantial Threat’
Bernanke said that an agreement on ways to reduce long-term federal budget deficits could remove an impediment to growth, while failure to avoid the fiscal cliff -- $607 billion in automatic tax increases and spending cuts scheduled to take effect at the beginning of 2013 unless Congress acts -- would pose a “substantial threat” to the recovery.
“Cooperation and creativity to deliver fiscal clarity -- in particular, a plan for resolving the nation’s longer-term budgetary issues without harming the recovery -- could help make the new year a very good one for the American economy,” Bernanke said today in a speech in New York.
Euro-area finance chiefs will try today to agree to extra financing for Greece. Recycling European Central Bank profits on Greek bonds, charging Greece lower interest rates and extending repayment deadlines are among the options under consideration. The gap was created after EU lawmakers last week gave the nation an extra two years to reach its budget-deficit goals.
European finance ministers have “good” chances of clinching a deal on Greece’s financing and are determined to keep the International Monetary Fund involved in the program, Luxembourg Prime Minister Jean-Claude Juncker said.
‘Event Risk’
Juncker told reporters that “Greece has delivered” before chairing a meeting of euro-area finance ministers in Brussels today.
“This afternoon’s meeting is important -- Greece remains an event risk for the euro,” said Kasper Kirkegaard, a senior currency strategist at Danske Bank A/S (DANSKE) in Copenhagen.
BOJ Governor Shirakawa told reporters in Tokyo he wants people to respect the bank’s independence and that unlimited money printing would be damaging. He spoke after the BOJ said it would keep its asset fund at 66 trillion yen ($807 billion) and a credit-lending facility unchanged at 25 trillion yen. All 22 economists surveyed by Bloomberg News had forecast no change.
Shinzo Abe, leader of the Liberal Democratic Party and favored to topple Japan’s prime minister in Dec. 16 elections, has advocated an increase in the central bank’s inflation goal to as much as 3 percent from 1 percent. The BOJ is scheduled to hold a policy meeting three days after the election.
Shirakawa’s comments were “sharp rebuke to Shinzo Abe,” Boris Schlossberg, managing director of foreign exchange at BK Asset Management, an investment advisory firm in New York, wrote today in a note to clients. “It appears that the BOJ will not cooperate with Mr. Abe should he be elected in December, thus forcing him to implement his more dramatic proposals.”
Dollar, Yen
The 14-day relative strength index for the dollar against the Japanese currency rose to 71 yesterday, above the 70 level that some traders see as a sign an asset’s move may change direction.
The dollar will remain locked in a 19-month trading range versus the yen until it breaks through key technical levels and approaches its yearly high set in March, according to MacNeil Curry, head of foreign-exchange and interest-rates technical strategy at Bank of America Merrill Lynch in New York.
A break above 81.88 will open up resistance at 82.67 yen, the 78.6 percent retracement of a March 2012 rally that saw the dollar reach 84.18, its 2012 high, Curry said. Resistance is an area where sell orders may be clustered.
France Downgrade
The euro dropped earlier after Moody’s cut France by one grade to Aa1 from Aaa and said the nation’s outlook remains negative “as a result of its deteriorating economic prospects.”
The move follows similar action by Standard & Poor’s in January. Since S&P’s rating action, French government bonds have returned 9.4 percent, compared with 3.4 percent for German debt, and 2.5 percent for that of the U.S., according to Bank of America Merrill Lynch data.
“There is probably more downside until the knee-jerk reaction is out of the way,” Steven Englander, Citigroup Inc.’s New York-based global head of Group of 10 strategy wrote of the euro in an e-mail to clients. “This more reflects an already existing reality than new information for the market, so the downside should be relatively limited.”
To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
