Tuesday, 3 December 2013

Dollar Rises to Six-Month High as Tapering Weighed Amid Recovery

By Kristine Aquino & David Goodman - Dec 3, 2013 12:29 AM PT

The dollar rose to its strongest level versus the yen in more than six months as investors weigh whether signs of a strengthening economy will be enough for the Federal Reserveto reduce currency-debasing stimulus measures.
The Bloomberg U.S. Dollar Index headed for its highest closing level in more than two months after a report yesterday showed manufacturing unexpectedly accelerated in November at the fastest pace since April 2011. A private survey tomorrow may show employers in the U.S. boosted jobs last month by the most since June. Australia’s dollar reached a five-year low versus its New Zealand counterpart as the larger nation’sReserve Bank said a weaker currency was needed for balanced growth.
Yen & U.S. Dollar The dollar was little changed at 102.95 yen as of 8:43 a.m. in Tokyo after touching 103.13 yesterday, the highest since May 23. Photographer: Yuriko Nakao/Bloomberg
Dec. 2 (Bloomberg) -- Neil Jones, head of European hedge-fund sales at Mizuho Bank Ltd., talks about the outlook for the yen and dollar. He spoke Nov. 29 in London. (Source: Bloomberg)
Dec. 2 (Bloomberg) -- Todd Elmer, head of Group-of-10 strategy for Asia ex-Japan at Citigroup Inc. in Singapore, talks about the yen, Bank of Japan monetary policy and the nation's economy. Elmer also discusses the outlook for the U.S. and Australian currencies and central bank policies. He speaks with Mia Saini on Bloomberg Television's "First Up." (Source: Bloomberg)
“U.S. data is going to keep driving the direction of the dollar,” said Yuji Kameoka, chief currency strategist inTokyo at Daiwa Securities Co., “Yesterday’s numbers have boosted the view that tapering could happen in December.”
The dollar gained 0.2 percent to 103.12 yen at 8:18 a.m. London time after earlier touching 103.38, the highest level since May 23. It was at $1.3554 per euro. The shared currency climbed 0.3 percent to 139.76 yen, after reaching 139.94, the highest since October 2008.
The Bloomberg U.S. Dollar Index, which tracks the currency against 10 major counterparts, was at 1,023.78, set for the highest close since Sept. 12. Currency volatility increased for a second day, with the JPMorgan Chase & Co. Group of Seven Volatility Index climbing to as high as 8.38 percent, the most since Oct. 11.

Dollar Strength

The dollar strengthened 3.9 percent this year against a basket of nine other developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen is the worst performer, having lost 14 percent. The euro was set for the biggest advance within the gauge, climbing 7.1 percent.
ADP Research Institute will say tomorrow companies in the U.S. added 170,000 positions in November, which would be the most in five months, according to the median estimate of economists surveyed by Bloomberg News.
The Institute for Supply Management’s non-manufacturing index tomorrow may indicate continued expansion in industries that make up almost 90 percent of the world’s biggest economy. A similar gauge for the manufacturing industry expanded to 57.3 in November, the highest since April 2011, from 56.4 a month earlier, the Tempe, Arizona-based group said yesterday. Readings above 50 indicate growth.
“While the U.S. data continue to print better, the dollar will be supported,” said Yuki Sakasai, a foreign-exchange strategist at Barclays Plc. in New York. “There’s a view in the market that the Fed might taper in December.”

Beige Book

The U.S. central bank is scheduled to release tomorrow its Beige Book business survey that provides policy makers with anecdotal accounts from the Fed districts two weeks before they meet to set monetary policy.
Officials will next gather on Dec. 17-18. They may reduce the central bank’s $85 billion in monthly bond purchases “in coming months” as the economy improves, according to minutes of their October meeting released last month.
Hedge funds and other large speculators are betting on declines in the euro for the first time since July, according to Commodity Futures Trading Commission data.
The difference in the number of wagers on a drop in the 17-nation currency compared with those on a gain -- so-called net shorts -- was 431 in the week ended Nov. 26, compared with a net long position of 8,911 in the previous period. Investors boosted bets on a slide in the yen to 123,202, the most since July 2007, according to CFTC figures.

‘Buying Interest’

“The current backdrop presents the scope for a valuation-driven pullback toward the channel base at 1.3471,” George Davis, chief technical analyst for fixed-income and currency strategy at Royal Bank of Canada, wrote in reference to the euro in an e-mailed note to clients yesterday. “While a daily close below this level would expose 1.3402 and 1.3314 via a bearish short-term trend reversal, we believe that pullbacks to these two levels will attract renewed buying interest.”
The euro gained for a ninth day against the yen, the longest winning streak in almost four years, as European Central Bank officials prepared to gather on Dec. 5 for their next policy meeting. They will keep the benchmark rate at a record-low 0.25 percent, another Bloomberg survey showed.
Australia’s dollar remained lower after the nation’s central bank held its benchmarkinterest rate at a record low of 2.5 percent, as forecast in a Bloomberg survey of economists.
The Aussie lost 0.1 percent to NZ$1.1110 after touching NZ$1.1096, the weakest since October 2008. It fell 0.1 percent to 90.98 U.S. cents.
To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.netDavid Goodman in London at dgoodman28@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net