Dollar Drops for a Fourth Week on Bets Federal Reserve Will Buy More Debt - The dollar fell against the euro for a fourth week in the longest stretch of losses in almost two years as bigger-than-expected U.S. job cuts spurred speculation that the Federal Reserve will buy more debt.
The U.S. currency dropped yesterday below 82 yen for the first time since 1995 before next week’s release of the central bank’s Sept. 21 policy meeting minutes. The Australian dollar and franc rallied to records against the greenback as investors sought currency alternatives, with the Aussie approaching parity and the Swiss currency trading higher for a third week.
“There was nothing in the data to eliminate the possibility of QE2 from the Fed,” said George Davis, chief technical analyst for foreign-exchange strategy at Royal Bank of Canada in Toronto. “Staying overbought at such an extreme level for the euro indicates how bullish the market really is.”
The dollar decreased for a third week against the yen, dropping 1.6 percent to 81.93, from 83.22 on Oct. 1. It touched 81.73 yesterday, the lowest level since April 1995. The dollar fell 1.1 percent to $1.3939 per euro, from $1.3791, in its fourth weekly decline. It touched $1.4029 on Oct. 7, the weakest since Jan. 28. The euro decreased 0.5 percent to 114.19 yen, from 114.78, after touching 115.68, the highest since May 14.
The greenback slid against the euro for five straight weeks through Dec. 26, 2008, after the Fed cut the target lending rate to a range of zero to 0.25 percent.
Relative Strength
The seven-day relative strength index of the euro versus the dollar rose yesterday to 80.42, remaining above 70 for a 15th consecutive day in the longest stretch since March 2008. Readings above that level indicate a currency’s rally may be difficult to sustain. A sustained drop in the euro below $1.3816 would signal a reversal in dollar weakness, according to Davis.
U.S. employers cut payrolls by 95,000 workers after a revised 57,000 decrease in August, Labor Department figures in Washington showed yesterday. The median forecast of 87 economists surveyed by Bloomberg News called for a 5,000 drop. The unemployment rate unexpectedly held at 9.6 percent.
Fed Chairman Ben S. Bernanke said on Oct. 4 that the central bank’s first round of large-scale asset purchases aided the economy and that further quantitative easing is likely to help more. St. Louis Fed President James Bullard said yesterday in an interview on CNBC that the chance of a renewed U.S. recession has receded and there may not be a strong enough case for additional stimulus.
‘Muted’ Easing
“Fed officials are starting to go back and forth on positions, trying to temper people’s expectations, saying don’t price it all in,” said Brian Kim, a currency strategist at UBS AG in Stamford, Connecticut. “If they do QE, the effect will be muted, so they are trying to control expectations.”
The yen ended the week stronger than 82.88 per dollar, where it traded on Sept. 15, when Japan acknowledged intervening in the currency market. Chief Cabinet Secretary Yoshito Sengoku said last month the finance ministry “seems to think” 82 is the line of defense to protect the export-dependent economy.
Finance Minister Yoshihiko Noda of Japan told reporters yesterday in Tokyo before departing for a Group of Seven meeting in Washington that the nation doesn’t intend to return to the long-term, large-scale intervention campaigns of the past.
Canadian Finance Minister Jim Flaherty, who chairs the G-7 gathering, said this week that “there are concerns about interventions in currency markets” and that he’s “sure” the issue will be discussed.
IMF Meeting
Swiss Finance Minister Hans-Rudolf Merz said yesterday the “currency war” issue “hasn’t played a role” in discussions during an International Monetary Fund meeting in Washington.
The Bank of Japan adopted this week a 5 trillion yen ($60 billion) program aimed at lowering long-term borrowing costs and the premiums on corporate debt. It also cut its benchmark overnight interest rate for the first time since 2008, lowering it to zero to 0.1 percent.
European Central Bank President Jean-Claude Trichet said on Oct. 7 that policy makers remained committed to phasing out a program of lending unlimited amounts.
The pound advanced 0.9 percent to $1.5960 after the Bank of England held the target for bond holdings at 200 billion pounds ($319 billion). Sterling touched $1.6018 on Oct. 7, the highest level since Feb. 3.
The Brazilian real had its eighth straight weekly gain against the dollar, appreciating to 1.6661, as a tax increase on foreigners’ purchases of fixed-income assets failed to slow investment in the country.
The Swiss franc traded at record levels against the greenback, gaining for a fourth straight week as investors sought easily traded alternatives to the dollar. It appreciated to a record 95.55 centimes on Oct. 7.
The Australian dollar rose for an eighth week against the greenback in the longest winning streak since May 2009. The Aussie touched a record high 99.18 U.S. cents on Oct. 7 on stronger-than-expected Australian employment data.
To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
The U.S. currency dropped yesterday below 82 yen for the first time since 1995 before next week’s release of the central bank’s Sept. 21 policy meeting minutes. The Australian dollar and franc rallied to records against the greenback as investors sought currency alternatives, with the Aussie approaching parity and the Swiss currency trading higher for a third week.
“There was nothing in the data to eliminate the possibility of QE2 from the Fed,” said George Davis, chief technical analyst for foreign-exchange strategy at Royal Bank of Canada in Toronto. “Staying overbought at such an extreme level for the euro indicates how bullish the market really is.”
The dollar decreased for a third week against the yen, dropping 1.6 percent to 81.93, from 83.22 on Oct. 1. It touched 81.73 yesterday, the lowest level since April 1995. The dollar fell 1.1 percent to $1.3939 per euro, from $1.3791, in its fourth weekly decline. It touched $1.4029 on Oct. 7, the weakest since Jan. 28. The euro decreased 0.5 percent to 114.19 yen, from 114.78, after touching 115.68, the highest since May 14.
The greenback slid against the euro for five straight weeks through Dec. 26, 2008, after the Fed cut the target lending rate to a range of zero to 0.25 percent.
Relative Strength
The seven-day relative strength index of the euro versus the dollar rose yesterday to 80.42, remaining above 70 for a 15th consecutive day in the longest stretch since March 2008. Readings above that level indicate a currency’s rally may be difficult to sustain. A sustained drop in the euro below $1.3816 would signal a reversal in dollar weakness, according to Davis.
U.S. employers cut payrolls by 95,000 workers after a revised 57,000 decrease in August, Labor Department figures in Washington showed yesterday. The median forecast of 87 economists surveyed by Bloomberg News called for a 5,000 drop. The unemployment rate unexpectedly held at 9.6 percent.
Fed Chairman Ben S. Bernanke said on Oct. 4 that the central bank’s first round of large-scale asset purchases aided the economy and that further quantitative easing is likely to help more. St. Louis Fed President James Bullard said yesterday in an interview on CNBC that the chance of a renewed U.S. recession has receded and there may not be a strong enough case for additional stimulus.
‘Muted’ Easing
“Fed officials are starting to go back and forth on positions, trying to temper people’s expectations, saying don’t price it all in,” said Brian Kim, a currency strategist at UBS AG in Stamford, Connecticut. “If they do QE, the effect will be muted, so they are trying to control expectations.”
The yen ended the week stronger than 82.88 per dollar, where it traded on Sept. 15, when Japan acknowledged intervening in the currency market. Chief Cabinet Secretary Yoshito Sengoku said last month the finance ministry “seems to think” 82 is the line of defense to protect the export-dependent economy.
Finance Minister Yoshihiko Noda of Japan told reporters yesterday in Tokyo before departing for a Group of Seven meeting in Washington that the nation doesn’t intend to return to the long-term, large-scale intervention campaigns of the past.
Canadian Finance Minister Jim Flaherty, who chairs the G-7 gathering, said this week that “there are concerns about interventions in currency markets” and that he’s “sure” the issue will be discussed.
IMF Meeting
Swiss Finance Minister Hans-Rudolf Merz said yesterday the “currency war” issue “hasn’t played a role” in discussions during an International Monetary Fund meeting in Washington.
The Bank of Japan adopted this week a 5 trillion yen ($60 billion) program aimed at lowering long-term borrowing costs and the premiums on corporate debt. It also cut its benchmark overnight interest rate for the first time since 2008, lowering it to zero to 0.1 percent.
European Central Bank President Jean-Claude Trichet said on Oct. 7 that policy makers remained committed to phasing out a program of lending unlimited amounts.
The pound advanced 0.9 percent to $1.5960 after the Bank of England held the target for bond holdings at 200 billion pounds ($319 billion). Sterling touched $1.6018 on Oct. 7, the highest level since Feb. 3.
The Brazilian real had its eighth straight weekly gain against the dollar, appreciating to 1.6661, as a tax increase on foreigners’ purchases of fixed-income assets failed to slow investment in the country.
The Swiss franc traded at record levels against the greenback, gaining for a fourth straight week as investors sought easily traded alternatives to the dollar. It appreciated to a record 95.55 centimes on Oct. 7.
The Australian dollar rose for an eighth week against the greenback in the longest winning streak since May 2009. The Aussie touched a record high 99.18 U.S. cents on Oct. 7 on stronger-than-expected Australian employment data.
To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
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