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Wednesday, 4 September 2013
Dollar Drops Versus High-Yield Peers on China Data; Pound Rises
By David Goodman - Sep 4, 2013 3:12 PM GMT+0400
The dollar weakened against its higher-yielding counterparts after a report showed China’s services industry expanded last month, adding to signs the global economy is recovering.
The U.S. currency ended a five-day run of gains that took it to the highest level since July, according to the Bloomberg U.S. Dollar Index. Australia’s currency climbed for a third day after the nation’s economic growth quickened, while the New Zealand dollar and the South African rand also advanced. The pound rose for a sixth day versus the euro, climbing to the strongest level in more than three months, after a gauge of U.K. services output reached the highest level since December 2006.
The U.S. currency was little changed at $1.3165 per euro as of 1:44 p.m. in Tokyo after touching $1.3139 yesterday, the strongest since July 22. Photographer: Chris Ratcliffe/Bloomberg
“There is more confidence that the global economy is appearing to be robust,” said Michael Sneyd, a currency strategist at BNP Paribas SA in London. “We generally are seeing investors putting on risk-on positions, particularly in the Aussie and the kiwi, following slightly stronger data in Australia and China.”
The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 other major currencies, fell 0.2 percent to 1,034.17 at 7:01 a.m. New York time after reaching 1,038.61 yesterday, the most since July 16. The index had risen 1.1 percent in the past five days.
The Aussie dollar climbed 1.1 percent to 91.59 U.S. cents after reaching 91.68, the highest since Aug. 19. The New Zealand dollar also strengthened 1.1 percent, to 78.89 U.S. cents, while the South African rand, the worst performer against the greenback this year, advanced 1 percent to 10.2304 per dollar.
HSBC Holdings Plc’s and Markit Economics’s services gauge for China rose to 52.8 last month from July’s 51.3. An official report released Sept. 1 showed a manufacturing gauge climbed to a 16-month high in August, while data yesterday revealed the government’s services index at 53.9 in August, above the 50 level that indicates expansion.
The dollar was little changed at 99.46 yen after reaching 99.86 yesterday, the highest since Aug. 2. The U.S. currency was also little changed, at $1.3184 per euro after touching $1.3139 yesterday, the strongest since July 22. The yen traded at 131.09 per euro.
Australia’s dollar also climbed as a report showed second-quarter gross domestic product grew 0.6 percent from the previous three-month period, when it expanded a revised 0.5 percent. Analysts had forecast a 0.5 percent expansion.
“The Aussie has jumped up on the GDP news because the number was a little better than markets were anticipating,” said Besa Deda, the chief economist at St. George Bank Ltd. in Sydney.
The Bank of England and the European Central Bank will announce interest-rate decisions tomorrow. U.K. central bank Governor Mark Carney introduced forward guidance on the path ofinterest rates last month, saying the Monetary Policy Committee won’t consider raising its key rate until unemployment falls to 7 percent, while MPC member Martin Weale voted against it.
“There is some speculation that the strength of the recent data will see another member join Weale’s dissent,” currency strategists at Brown Brothers Harriman & Co. led by Marc Chandlerin New York wrote in a research note.
Sterling strengthened 0.2 percent to 84.45 pence per euro after touching 84.27 pence, the strongest level since May 16. It climbed 0.4 percent to $1.5612.
The euro weakened against most of its major peers after a gauge of services output in the euro area, based on a survey of purchasing managers, expanded less than initially estimated in August. Separate data showed the region’s economy grew 0.3 percent in the three months through June, in line with a forecast last month.
Federal Reserve policy makers are debating whether the economy is strong enough to allow them to pare monthly purchases of $85 billion in Treasuries and mortgage debt, which tend to debase the dollar. Officials will reduce the amount at their Sept. 17-18 meeting, according to 65 percent of economists in an Aug. 9-13 Bloomberg survey.
The Fed releases its outlook survey known as the Beige Book today.
The ADP Research Institute will say tomorrow that companies added 180,000 jobs last month, following a 200,000 increase in July, the most since December, according to the median estimate of economists surveyed by Bloomberg News. Labor Department figures due Sept. 6 will show payrolls rose by 180,000 in August while the jobless rate held at 7.4 percent, according to a separate survey.
“It’s still a broadly constructive dollar environment,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “The payrolls report is first among equals as far as data is concerned, which is not surprising given the preoccupations with tapering.”