The dollar fell against the majority of its most-traded peers as political wrangling about the U.S. budget threatened a partial government shutdown tomorrow.
The U.S. currency pared declines as three economic reports showed business activity expanded more than forecast. The yen erased its rally versus the dollar even with Congress deadlocked and a decision on raising the debt ceiling needed within three weeks. The euro gained as Italian Prime Minister Enrico Letta’s deputy finance chief expressed confidence in preventing the government from collapsing. Norway’s krone declined against all except one of its 16 major counterparts.
The U.S. currency extended its biggest weekly slide versus the yen in more than a month with Congress deadlocked over Republicans’ insistence on delaying the 2010 health-care law. Photographer: Andrew Harrer/Bloomberg
Sept. 30 (Bloomberg) -- Nick Beecroft, chairman of Saxo Capital Markets U.K. Ltd., talks about the outlook for the euro and dollar, and European Central Bank policy. He spoke Sept. 26 in London. (Source: Bloomberg)
“Markets are in the risk-off mode with the possible government shutdown in the U.S. and political uncertainty in Italy,” Vassili Serebriakov, a foreign-exchange strategist at BNP Paribas SA in New York, said in a telephone interview. “The dollar has not been not playing the safe-haven role through this latest period I think because throughout the year the dollar tended to trade more positive with risk than negatively.”
The Bloomberg U.S. Dollar Index, which tracks the performance of a basket of 10 leading global currencies against the dollar, fell for a second trading-day, declining 0.1 percent to 1,012.16 at 2:19 p.m. New York time, after weakening as much as 0.2 percent.
The yen was little changed at 98.28 per dollar after touching 97.50, the strongest since Aug. 29. Japan’s currency fell 0.1 percent to 132.95 versus the euro after appreciating to 131.38, the strongest since Sept. 9. The euro was littl changed at $1.3528.
The New Zealand dollar has gained 7.7 percent versus the greenback this month, while yen fell 0.1 percent.
This quarter, the kiwi has led all major gainers with a 7.5 percent increase, while the worst-performing South African rand has slipped 1.9 percent. Denmark’s krone is the best-performing currency in 2013 and the rand has plunged 15.8 percent.
Brazil’s central bank increased its 2014 inflation forecast as a weaker currency undermines the world’s biggest interest rate increase. The real gained 1.6 percent to 2.2173 per dollar.
The U.S. Congress has one day to end a stalemate that raises the risk of the first government shutdown in 17 years and threatens talks to increase the debt limit.
Failure to approve funding to keep the government open and to raise the debt ceiling would have a destabilizing effect on the economy, President Barack Obama said in a televised statement on Sept. 27. Closing the government would cut fourth-quarter economic growth by as much as 1.4 percentage points depending on its length, according to economists from Moody’s Analytics Inc. to Economic Outlook Group LLC.
“There are so many uncertain factors ahead of us, it’s no wonder that risk is off,” said Niels Christensen, chief currency strategist at Nordea Bank AB in Copenhagen. “We are seeing the usual pattern with a stronger Swiss franc, yen, and if anything the dollar very much on the defensive.”
The MNI Chicago Report business barometer rose to 55.7 in September from 53 the prior month. Numbers greater than 50 signal expansion. The median forecast of economists surveyed by Bloomberg was 54.
The Dallas Fed’s manufacturing gauge jumped to 12.8, versus a Bloomberg poll’s projection of 5.5 and a reading in August of 5. The Institute for Supply Management’s Milwaukee index rose to 55, versus a forecast of 50 and an August reading of 48.2.
Italy’s Letta said he will ask for a vote of confidence on Oct. 2, speaking on Rai 3 television. The Italian government has been torn apart by legal troubles facing former leader Silvio Berlusconi, whose criminal tax-fraud conviction subjects him to expulsion proceedings in parliament. Berlusconi allies have said they planned to quit the cabinet.
“We think he’ll survive the no confidence vote and keep the government going.” BNP Paribas’s Serebriakov said. “It’ll still be a weakened, but that’s our base case.”
Europe’s common currency slipped as much as 0.3 percent to 1.2214 per franc, the weakest since May 3, before trading at 1.2222. It has declined 0.6 percent since June 28, set for its first quarterly drop since December.
The yen strengthened before Japanese Prime Minister Shinzo Abe is due to outline his plans tomorrow for taxes and an economic-support package. Japan is set to raise its sales tax next year for the first time since 1997, and Abe may introduce a stimulus plan to offset the resulting drag on growth.
An increase in sales tax may spur yen gains unless balanced by measures to support growth, said Stan Shamu, a market strategist at IG Ltd. in Melbourne. “Talk of an urgent call for a corporate tax cut has been suddenly quashed,” he said.
The krone fell for a second day after a report from Norway’s statistics agency showed retail sales grew 0.2 percent in August, after dropping 1.3 percent the month before. The median prediction of six economists surveyed by Bloomberg was 0.9 percent.
The krone slipped 0.5 percent to 6.0167 per dollar.
Trading in over-the-counter foreign-exchange options totaled $15.8 billion, compared with $29 billion on Sept. 27, according to data reported by U.S. banks to the Depository Trust Clearing Corp. and tracked by Bloomberg. Volume in options on the dollar-yen exchange rate amounted to $4.7 billion, the largest share of trades at 30 percent. Options on the dollar-yuan rate totaled $1.8 billion.
Dollar-yen options trading was 77 percent more than the average for the past five Mondays at a similar time in the day, according to Bloomberg analysis. Dollar-yuan options trading was 119 percent more than average.
By Emma Charlton & Anchalee Worrachate - Sep 30, 2013 7:32 PM GMT+0400
The pound rose above $1.62 to the highest level in almost nine months after reports showedhouse prices climbed the most in six years and mortgage approvals increased, adding to signs the economy is gaining momentum.
Sterling climbed to the strongest since January versus the euro after Bank of England GovernorMark Carney said last week that he saw no case for more stimulus that tends to debase a currency. U.K. government bonds dropped amid speculation Italian Prime Minister Enrico Letta can survive a challenge from former premier Silvio Berlusconi, damping demand for the safest fixed-income securities.
Sept. 30 (Bloomberg) -- Nick Beecroft, chairman of Saxo Capital Markets U.K. Ltd., talks about the outlook for the euro and dollar, and European Central Bank policy. He spoke Sept. 26 in London. (Source: Bloomberg)
“U.K. data have been better than expected,” said Lutz Karpowitz, a senior currency strategist at Commerzbank AG inFrankfurt. This “makes it more unlikely that the BOE will add to their stimulus,” and that is helping the pound, he said.
The pound climbed 0.3 percent to $1.6190 at 4:26 p.m. inLondon after rising to $1.6203, the highest level since Jan. 3. Sterling gained 0.2 percent to 83.59 pence per euro after appreciating to 83.40 pence, the strongest since Jan. 17.
The U.K. currency will advance to 83 pence per euro by year-end, Commerzbank’s Karpowitz said.
Average home prices in England and Wales rose 0.5 percent in September, the most since May 2007, after gaining 0.4 percent in August, property researcher Hometrack said. Mortgage approvals increased to 62,226, the most since February 2008, from a revised 60,914 the previous month, the Bank of England said in a monthly report.
Prime Minister David Cameron brought forward the second phase of his “Help to Buy” program yesterday. The plan, which will provide government-guaranteed mortgages for buyers with a deposit of as little as 5 percent of the value of homes costing as much as 600,000 pounds, will commence three months earlier than planned.
The government may “come in for renewed criticism for stoking up an already strong housing market at a time when many other countries are actively using macro-prudential policies to cool house prices,” Adam Cole, head of Group-of-10 currency strategy at Royal Bank of Canada in London, wrote in a note to clients. “This is short-term positive for the pound, as are the broader upside surprises U.K. data continue to deliver.”
Futures traders last week reversed their bets that the pound would weaken against the dollar, figures from the Commodity Futures Trading Commission released Sept. 27 showed.
The difference in the number of wagers by hedge funds and other large speculators on an advance in the pound compared with those on a drop -- so-called net longs -- was 1,174 on Sept. 24, compared with net shorts of 6,310 a week earlier. Futures are agreements to buy or sell assets at a set price and date.
Carney told the Yorkshire Post last week that the central bank would consider expanding its bond purchases, known as quantitative easing, only if the economy faltered.
The pound has risen 6.6 percent in the past six months, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro gained 5.6 percent, while the dollar weakened 0.6 percent.
Gilts reversed an earlier advance after Reuters reported that as many as 20 senators from Berlusconi’s People of Liberty party were prepared to leave the party if the ex-premier doesn’t back down.
Letta said yesterday he would seek a confidence vote on Oct. 2 to try to save his five-month-old administration after Berlusconi, a partner in the ruling coalition, withdrew his support and pulled his ministers from the cabinet.
“The situation in Italy was serious but the latest headlines suggested some form of political compromise will probably be reached,” said Nick Stamenkovic, a fixed-income strategist at RIA Capital Markets Ltd. in Edinburgh. “Gilts fell alongside bunds on the back of those headlines.”
The yield on the 10-year gilt rose one basis point, or 0.01 percentage point, to 2.72 percent after declining to 2.67 percent, the lowest level since Aug. 27. The 2.25 percent bond due in September 2023 fell 0.085, or 85 pence per 1,000-pound face amount, to 95.935.
The Bank of England said today foreign investors reduced their gilt holdings by 6.04 billion pounds in August, the most since June 2012. That followed a net purchase of 1.27 billion pounds in July.
Gilts lost 3.1 percent this year through Sept. 27, according to Bloomberg World Bond Indexes. German bunds dropped 1.5 percent and Treasuries fell 2.4 percent.
The yen advanced versus the dollar, heading for its second weekly gain, after comments byJapan’s Finance Minister Taro Aso damped bets the government will cut corporate taxes, boosting demand for the currency as a haven.
Japan’s currency gained as inflation in the country accelerated to the fastest pace since 2008 in August. The euro rose versus most of its major counterparts as economic data in the region exceeded forecasts in September. The pound rose against the dollar after Bank of EnglandGovernor Mark Carney told a U.K. newspaper he sees no case for further stimulus. The greenback was weaker amid concern a U.S. budget deadlock will shut down the government of the world’s largest economy.
The yen has fallen 0.4 percent versus the dollar this month, paring its quarterly advance to 0.6 percent. Photographer: Akio Kon/Bloomberg
Sept. 27 (Bloomberg) -- Alexander Friedman, chief investment officer at UBS AG, talks about his recommendations for the U.S. dollar and equities, and the outlook for Japan's economy. He speaks from Zurich with Francine Lacqua on Bloomberg Television's "On the Move." (Source: Bloomberg)
Japan’s Finance Minister Taro Aso told reporters today that funding sources would be needed if corporate tax rates were to be reduced. Photographer: Tomohiro Ohsumi/Bloomberg
“The yen is up amid rising inflation that could ease the Bank of Japan’s burden and as the finance minister suggested a corporate tax cut still needs to be evaluated,” Camilla Sutton, head of currency strategy at Bank of Nova Scotia (BNS), wrote today in a client note.
The yen appreciated 0.8 percent to 98.24 per dollar at 5:02 p.m. New York time. It strengthened 0.5 percent to 132.86 per euro. The 17-nation currency added 0.2 percent to $1.3522 per dollar.
The New Zealand dollar has gained 7.1 percent versus the greenback this month, while the yen has declined 0.1 percent.
This quarter, the kiwi has led all major gainers with a 6.9 percent increase, while the worst-performing South African rand has slipped 2.1 percent. Denmark’s krone is the best-performing currency in 2013 and the rand has plunged 16 percent.
South Korea’s won gained versus most of its major peers as data showed foreign funds pumped money into the nation’s stocks.
The won rose 0.1 percent to 1,073.65 per dollar, having surged 3.8 percent in September, the biggest monthly gain in almost two years. Overseas investors bought $6.8 billion more South Korean equities than they sold this month, exchange data show.
South Africa’s rand slid for a fourth day and headed for its longest losing streak in almost two months against the dollar as companies in the country demanded foreign currency to pay for imports. The rand depreciated 1 percent to 10.0886 per dollar after touching the weakest level since Sept. 6.
Consumer prices in Japan, excluding fresh food, increased 0.8 percent from a year earlier, the statistics bureau said today in Tokyo. The median forecast of 30 economists surveyed byBloomberg News was for a gain of 0.7 percent. Stripping out energy and perishables, prices fell 0.1 percent.
Aso told reporters today that funding sources would be needed if corporate tax rates were to be reduced. Kyodo News reported yesterday that the government of Prime Minister Shinzo Abe had pledged to begin a study on cutting the levy.
“The comment today that there may not be a tax cut is risk-negative, which has been a negative for dollar-yen,” Dan Dorrow, head of research at Faros Trading LLC in Stamford, Connecticut, said in a telephone interview. “There have also been uncertainties over the last week or so about a potential Washington shutdown, and the increase in risk has been yen-positive.”
The U.S. Senate passed a short-term spending bill, three days before federal spending authority runs out and a few weeks until the country hits its borrowing limit.
The yen tends to strengthen during periods of financial and economic turmoil because Japan isn’t reliant on foreign capital to fund its deficits.
An index of executive and consumer sentiment in the euro zone rose for a fifth month to 96.9 from a revised 95.3 in August, the European Commission in Brussels said today. That beat the median estimate of 96 in a Bloomberg survey of 26 economists.
Carney told the Yorkshire Post that the Bank of England would consider expanding its asset-purchase target, known as quantitative easing, should the economic recovery falter.
“Given the recovery has strengthened and broadened, I don’t see a case for quantitative easing and I have not supported it,” he said, according to the newspaper.
The pound increased 0.6 percent to $1.6139 after climbing to $1.6163 on Sept. 18, the highest since Jan. 11.
“This sits with the tone we’ve seen recently from the Bank of England, where there was an absence of very dovish rhetoric,” said Jane Foley, senior currency strategist at Rabobank International in London. “The message is that there may be further asset purchases should the recovery stall, but the data suggest that things are returning to normal. The market has quashed most of its hopes that there could be more QE,” supporting the pound.
The greenback was lower this week as investors weighed whether the Federal Reserve will reduce its bond purchases, which tend to weaken the currency. Minneapolis Fed PresidentNarayana Kocherlakota, a voter on policy next year, said yesterday that the central bank must do “whatever it takes” to strengthen a jobs market that is healing too slowly.
The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 major currencies, fell 0.3 percent to 1,012.75, leaving its monthly decline at 2.1 percent.
Trading in over-the-counter foreign-exchange options totaled $25.7 billion, from $23.5 billion yesterday, according to data reported by U.S. banks to the Depository Trust Clearing Corp. and tracked by Bloomberg. Volume in options on the dollar-yen exchange rate amounted to $8.8 billion, the largest share of trades at 34 percent. Options on the euro-dollar rate totaled $3.3 billion.
Dollar-yen options trading was 116 percent more than the average for the past five Fridays at a similar time in the day, according to Bloomberg analysis. Euro-dollar options trading was also 75 percent more than average.
The pound rose toward an eight-month high against the dollar after Bank of England GovernorMark Carney told a U.K. newspaper he saw no case for further asset purchases as the recovery has gained traction.
Sterling extended a fourth weekly gain, the longest run in a year, as Carney told the Yorkshire Post that policy makers would consider expanding quantitative easing only if the economy faltered. The pound rose versus all but two of its 16 major counterparts as a gauge of U.K.consumer confidence climbed to the highest level in almost six years and house pricesincreased. U.K. government bonds rose with German bunds as European stocks declined, boosting demand for safer assets.
The pound rose 0.3 percent to $1.6095 at 7:44 a.m. London time after climbing to $1.6163 on Sept. 18, the highest since Jan. 11. Photographer: Chris Ratcliffe/Bloomberg
“This sits with the tone we’ve seen recently from the Bank ofEngland, where there was an absence of very dovish rhetoric,” said Jane Foley, senior currency strategist at Rabobank International in London. “The message is that there may be further asset purchases should the recovery stall but the data suggest that things are returning to normal. The market has quashed most of its hopes that there could be more QE.”
The pound gained 0.6 percent to $1.6133 at 4:32 p.m. London time after climbing to $1.6163 on Sept. 18, the highest since Jan. 11. Sterling has strengthened 0.8 percent this week, the longest run of weekly gains since September 2012. The U.K. currency appreciated 0.2 percent to 83.95 pence per euro.
Carney spoke during a visit to the northern city of Leeds, according to the Yorkshire Post.
“My personal view is, given the recovery has strengthened and broadened, I don’t see a case for quantitative easing and I have not supported it,” he said in an interview with the newspaper published today on its website.
The pound has risen 6.8 percent in the past six months, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro appreciated 6 percent, while the dollar weakened 0.6 percent.
U.K. 10-year gilts rose for a fifth day as speculation the Italian government will collapse sent European stocks lower.
Italy’s Prime Minister Enrico Letta meets President Giorgio Napolitano today to discuss the government’s prospects for survival after former premier Silvio Berlusconi’s allies this week threatened to step down from the coalition if he is expelled from the Senate. The Stoxx Europe 600 Index of shares slipped 0.3 percent.
The benchmark 10-year gilt yield fell four basis points, or 0.04 percentage point, to 2.71 percent after dropping to 2.70 percent, the lowest since Aug. 27. The 2.25 percent bond maturing in September 2023 rose 0.3, or 3 pounds per 1,000-pound face amount, to 95.995. The yield has declined 21 basis points this week.
Gilts still handed investors a loss of 3.3 percent this year through yesterday, according to Bloomberg World Bond Indexes. German securities fell 1.7 percent and Treasuries declined 2.5 percent.
The Treasury said today Chancellor of the Exchequer George Osborne will introduce annual checks with the Bank of England’s Financial Policy Committee on whether his Help-to-Buy program is fueling excessive price increases in the housing market.
“The pound is deriving support from Governor Carney’s comments on QE,” Derek Halpenny, European head of global-markets research at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, wrote in a note to clients. “More interesting to us was the news that Chancellor Osborne will give the Financial Policy Committee some control over containing how the Help-to-Buy scheme is implemented.”
That will provide greater policy flexibility and remove the potential burden on interest rates as a tool for managing the economy and help anchor expectations for when the central bank eventually raises interest rates, Halpenny wrote.
By Lu Wang & Sofia Horta e Costa - Sep 27, 2013 12:00 AM GMT+0400
U.S. stocks rose, halting the longest slump this year for the Standard & Poor’s 500 Index, as an unexpected drop in jobless claims overshadowed concern that a budget impasse could hurt economic growth.
The S&P 500 rose 0.4 percent to 1,698.67 at 4 p.m. in New York, extending its third-quarter rally to 5.8 percent.
Traders work on the floor of the New York Stock Exchange in New York. Photographer: Scott Eells/Bloomberg
Sept. 26 (Bloomberg) -- The number of Americans filing applications for unemployment benefits unexpectedly declined last week, showing further progress in the labor market. Jobless claims decreased by 5,000 to 305,000 in the week ended Sept. 21, a Labor Department report showed today in Washington. Deirdre Bolton and Sara Eisen report on Bloomberg Television's "In the Loop." (Source: Bloomberg)
Sept. 26 (Bloomberg) -- Mark Zandi, chief economist at Moody's Analytics Inc., and David Plouffe, a former adviser to U.S. President Barack Obama and a Bloomberg contributor, talk about the potential impact on the U.S. economy if an agreement on the nation's debt ceiling is not reached. They speak with Erik Schatzker and Stephanie Ruhle on Bloomberg Television's "Market Makers." (Source: Bloomberg)
“Economic news have been reasonably good,” Mark Foster, chief investment officer who oversees $620 million at Kirr Marbach & Co. in Columbus, Indiana, said in a telephone interview. “On the negative side, we have the short-term budget issues and debt ceiling. I don’t think that’ll end up being a major issue. People just get somewhat immune to all of that.”
The benchmark index declined 1.9 percent during a five-day losing streak through yesterday, retreating from an all-time high on Sept. 18, when the Federal Reserve refrained from reducing the pace of stimulus. Investors have been watching economic reports to help determine whether growth is sufficient for the central bank to begin cutting bond purchases at its next meeting in October.
A Labor Department report today showed the number of Americans filing applications for unemployment benefits unexpectedly fell last week, indicating further progress in the labor market. The economy expanded at faster pace in the second quarter from the previous three months, with gross domestic product rising at a 2.5 percent annualized rate, the Commerce Department said.
A separate report added to signs that rising mortgage rates may have slowed housing market momentum. Fewer Americans signed contracts in August to buy previously owned homes, figures from the National Association of Realtors showed. Data yesterday indicated purchases of new homes rose in August, capping the weakest two months this year.
Investors are also weighing whether lawmakers can avoid a looming government shutdown, with the S&P 500 (SPX) paring an earlier gain of as much as 0.7 percent after House Speaker John Boehner, an Ohio Republican, said he doesn’t expect his chamber to pass a stopgap spending bill expected from the Senate. He also said he does not expect a government shutdown to happen.
The Senate likely will not vote on its version of the bill until this weekend, leaving the House just one full workday to act before spending authority for the federal government expires on Oct. 1. The House and Senate are at odds over language that withdraws funding for the 2010 health-care law.
The Office of Management and Budget estimated 30 days of shutdowns in 1995 and 1996 cost more than $1.4 billion, or $2.09 billion in today’s dollars.
On another fiscal front, Treasury Secretary Jacob J. Lew told Congress yesterday that the extraordinary measures being used to avoid breaching the debt ceiling “will be exhausted no later than Oct. 17.” Failure to increase the debt limit could lead to a downgrade of the U.S. government’s credit rating.
The S&P 500’s losing streak through yesterday was the index’s longest since Dec. 28, when lawmakers wrangled over impending automatic spending cuts and tax increases known as the fiscal cliff. The index dropped as much as 3.4 percent over the last two weeks of 2012 and then jumped 5 percent in January for the best start to a year since 1997 after a last-minute budget deal was struck.
“Washington has been dragging their feet as of late but eventually they’ll be forced into action,” said Patrick Spencer, head of U.S. equity sales for Robert W. Baird & Co. in London. “We’ve been down this road before. It’s quite natural and healthy to have pull-backs in a bull market. We’ll shift into a stronger gear with a settlement on the budget and what I think will be a very positive earnings season.”