Tuesday, 10 September 2013

Dollar Touches Two-Week Low as Syria Strike Debated

By John Detrixhe & David Goodman - Sep 10, 2013 5:00 PM GMT+0400
The dollar traded at almost its lowest level this month as the U.S. weighs a plan to confiscate Syrian chemical weapons that may diffuse a potential military strike, reducing demand for haven assets.
Japan’s currency declined versus all of its 16 major counterparts for a second day as minutes of the Bank of Japan’s August meeting showed policy makers agreed monetary easing was taking effect. Australia’s dollar advanced to the strongest in six weeks as Chinese reports added to signs of recovery in the South Pacific nation’s largest trading partner. Norway’s krone jumped after inflation accelerated.
Sept. 10 (Bloomberg) -- Scott Cavanough, senior vice president of financial markets at Compass Global Markets, talks about Federal Reserve monetary policy and its effect on global currencies. He speaks from Sydney with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
“It seems like the U.S. is considering other options, other than striking, mainly that Russian proposal and I think that’s giving markets more comfort,” Sireen Harajli, a foreign exchange strategist at Mizuho Bank in New York, said in a telephone interview. “In terms of the effect on the dollar, if that situation intensifies then you’re going to see safe-haven buying.”
The Bloomberg U.S. Dollar Index, which measures the greenback against 10 major peers, traded at 1,028.38 at 8:55 a.m. in New York after touching 1,026.53, the lowest since Aug. 28.
The yen dropped 0.7 percent to 132.85 per euro after sliding to the weakest since May 22.Japan’s currency fell 0.7 percent to 100.27 per dollar after depreciating to the least since July 25. The euro was little changed at $1.3248.

Krone Strength

Norway’s krone climbed 1.1 percent to 7.87763 per euro after a report showed inflation accelerated to 3.2 percent in August, compared with a median estimate of 3 percent in a Bloomberg survey of economists.
Currency volatility as measured by JPMorgan Chase & Co.’s G-7 Volatility Index declined as much as 0.05 percentage point to 9.09 percent, the lowest since Aug. 12. The Stoxx Europe 600 Index of shares gained 1.3 percent and the MSCI Asia Pacific Index advanced 1.2 percent.
France said it will submit a Russian-backed plan to confiscate Syria’s chemical weapons to the United Nations, as Interfax reported that Bashar al-Assad’s government accepted the proposal.
France will ask the UN Security Council to approve a resolution demanding that Syria place its chemical arms under international control, Foreign Minister Laurent Fabius said today in Paris. The draft will call for Assad to be punished for an Aug. 21 chemical-weapons attack that the U.S. and allies say was carried out by his forces, Fabius said. He said the Russian proposal mustn’t be allowed to become a “diversion,” and the submission to the UN will help “nail down” the idea.

Haven Watch

“An easing over Syria will help dollar-yen,” said Neil Jones, head of European hedge-fund sales at Mizuho Bank Ltd. in London. “Global confidence will increase causing investors to borrow yen and invest in higher-yielding assets.”
The yen also weakened as minutes of the BOJ’s Aug. 7-8 meeting showed policy board members said bond purchases were putting downward pressure on yields and consumer-price expectations have turned favorable.
“The yen is weakening because there is plenty of risk appetite,” said Peter Frank, global head of currency strategy at Banco Bilbao Vizcaya Argentaria SA (BBVA) in London. “Everything is going right for the government” in Japan, he said.
The yen has declined 2.1 percent in the past week, the worst performer of 10 developed-nation currencies tracked by Bloomberg Correlation Weighted Indexes. The dollar dropped 1.3 percent and the euro fell 0.6 percent.

Aussie Gains

The Aussie strengthened for a third day against its U.S. counterpart after an index of business confidence improved to the highest since May 2011 as the prospect of a change in government lifted sentiment.
The confidence index for August jumped to 6 from minus 3, according to a National Australia Bank Ltd. survey released today. Factory production in China increased 10.4 percent last month from a year earlier, compared with a 9.7 percent gain in July, the National Bureau of Statistics said in Beijing.
“The Aussie dollar is reacting positively to data out of China,” said Takuya Kawabata, an analyst at Gaitame.com Research Institute Ltd. in Tokyo. “Expectations that China’s economic recovery is underway are building.”
Australia’s dollar rose 0.6 percent to 92.86 cents after appreciating the highest since July 26.
The Philippine peso climbed the most in more than three years as a report showed exports unexpectedly rose in July. The peso strengthened 1 percent to 43.823 per dollar, the steepest advance since June 2010, Tullett Prebon Plc data show.
Taiwan’s dollar rose to the strongest level since June after exports increased for a fourth month. The currency gained 0.2 percent to 29.76 per dollar.
To contact the reporters on this story: David Goodman in London at dgoodman28@bloomberg.net; John Detrixhe in New York at jdetrixhe1@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net