By Simon Kennedy and Theophilos Argitis
June 14 (Bloomberg) -- Finance ministers from Europe and Canada signaled a stronger dollar could help combat surging commodity prices as they and counterparts from the world's richest nations gathered for talks in Japan.
``The strengthening of the dollar seems very satisfying to me,'' France's Christine Lagarde said as she arrived in Osaka for a meeting of Group of Eight officials. Canada's Jim Flaherty said in an interview that a strong U.S. currency ``can help on the inflationary side because of the difference it makes with a low U.S. dollar in terms of oil prices.''
The U.S. currency posted its biggest weekly gain since 2005 against the euro on speculation the G-8 officials will signal they favor further increases. Its slide of the past six years has been blamed in part for the jump in the cost of fuel and food, which is topping the agenda at the G-8 talks.
``The oil-currency nexus is so powerful,'' said Stephen Jen, chief currency strategist at Morgan Stanley in London. ``Both are complicating policy making and hurting the global economy.''
The G-8 will warn in its statement that the jump in commodity costs risks weaker growth and faster inflation, according to an official from a G-8 country who spoke on the condition of anonymity. Such an environment complicates policy choices for governments, which will pledge to remain vigilant and take appropriate actions to ensure stability and expansion of the world economy, the official said.
Oil Prices
Oil reached an unprecedented $139.12 a barrel on June 6 and the United Nations estimates food costs soared 51 percent in the past year as rice, other grains and soybeans all set records. Inflation has replaced the credit squeeze as the main economic concern for ministers meeting in Osaka as higher prices erode household budgets, increase production costs, spark protests and spur central banks to raise interest rates.
Most raw materials are priced in the U.S. currency, providing investors with a hedge against its 5 percent fall versus the euro this year. The International Monetary Fund estimates the dollar's 30 percent decline on a trade-weighted basis since 2002 has added $25 to the price of oil.
``You can't discuss the volatility of oil products without discussing the questions linked to exchange rates, even if exchange rates aren't a determined topic of the G-8,'' Lagarde told reporters yesterday.
The G-8 typically omits mention of currencies in its joint statements because central bankers aren't at the meeting. The communique is scheduled to be released about 1 p.m. today.
Fed Language
Investors still speculate that the dollar will be mentioned by ministers at press conferences after U.S. policy makers including Federal Reserve Chairman Ben S. Bernanke this month toughened their language to support it.
The dollar strengthened to $1.5376 per euro, a gain of 2.6 percent this week. It's also set its biggest weekly advance against the yen since December 2004.
``There is a new momentum for supporting the dollar, and comments from the G-8 will be skewed in that direction,'' said Adam Cole, head of global currency strategy at Royal Bank of Canada in London.
Having previously signaled indifference toward the dollar's drop as it encouraged exports, U.S. officials this month sought to prop it up on concern a weaker currency risks fanning inflation by making imports more expensive.
Bernanke `Attentive'
Bernanke said on June 2 that the central bank is ``attentive'' to the currency's value, a day after Treasury Secretary Henry Paulson said he ``very strongly'' favors a ``strong dollar.''
Deputy German Finance Minister Thomas Mirow said in an interview yesterday that European governments are also keen to ensure that the dollar's depreciation isn't ``carried by the euro alone.'' Europeans fear the euro's rise will sap their exports.
Policy makers' worry about the dollar may fail to buoy it. There is little sign governments are willing to intervene to buy dollars for the first time since 1995. European Central Bank officials say they may raise their key interest rate a quarter point to 4.25 percent in July. That would make it more profitable to hold euros than dollars even as the Fed is forecast to leave its main rate at 2 percent this month after cutting it seven times since September.
Limited Influence
The G-8 may fail to temper rising oil prices. Excluding Russia, the group produces less than 20 percent of the world's crude, forcing its governments to lobby the Organization of the Petroleum Exporting Countries to bolster output and press consuming nations to use energy more efficiently. That has proved an unsuccessful approach since it was adopted four years ago, when oil was about $40 a barrel.
``The position that more development, more investment and an increase in supply are needed is becoming universal and is something we support,'' Russian Finance Minister Alexei Kudrin said in Osaka yesterday. ``The question is why does OPEC think current supply is enough?''
Saudi Arabia, the world's top oil exporter, will seek measures to damp crude prices at a meeting it will host for oil producers, consumers and companies this month, Oil Minister Ali al-Naimi said.
To contact the reporter on this story: Simon Kennedy in Osaka, Japan, at skennedy4@bloomberg.net. Theophilos Argitis in Osaka, Japan, at targitis@bloomberg.net.
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Saturday, June 14, 2008
Gold, Silver Rebound on Investor Demand for Inflation Hedge
By Pham-Duy Nguyen
June 13 (Bloomberg) -- Gold rose, erasing earlier losses, on speculation that higher food and energy costs will spur inflation and boost demand for precious metals as a hedge against inflation. Silver also climbed.
A government report showed U.S. consumer prices last month rose 0.6 percent, the most since November. Corn touched a record for a seventh straight session today. Soybeans, wheat and rice prices have climbed to all-time highs this year, and crude oil more than doubled in the past year as gold gained 34 percent.
``Real interest rates remain negative,'' said James Turk, the founder of GoldMoney.com, which held $352 million in gold and silver in storage for investors at the end of May. ``Inflation is greater than the interest income you can earn on your dollars, so after adjusting for inflation, you are losing purchasing power.''
Gold futures for August delivery rose $1.10, or 0.1 percent, to $873.10 an ounce on the Comex division of the New York Mercantile Exchange. Gold touched a record $1,033.90 on March 17. This week, the price has dropped 2.9 percent, the second decline in three weeks.
Silver futures for July delivery gained 7.5 cents, or 0.5 percent, to $16.56 an ounce on the Comex. The price advanced 11 percent this year, while gold climbed 4.2 percent.
Consumer prices rose 4.2 percent in the 12 months ending May 31, the Labor Department said today. Gold rallied 31 percent last year as consumer costs accelerated 4.1 percent, the most in 17 years.
Dollar, Oil
Still, gold traded lower most of the session as the dollar headed for the biggest weekly gain in three years against the euro. Crude-oil prices dropped 2.5 percent this week after climbing 8.8 percent last week.
The U.S. currency climbed on speculation the Federal Reserve will raise interest rates to contain inflation.
Gold rallied 39 percent from Sept. 17 to March 17 as the Fed slashed borrowing costs, after a housing slump and a credit squeeze threatened to push the U.S. economy into a recession.
The benchmark federal-funds rate is at 2 percent, down from 5.25 percent in mid-September after seven reductions. Interest- rate futures show a 50 percent chance the Fed may raise the rate to 2.25 percent by Aug. 5, compared with no chance a month ago.
``The specter of higher interest rates is negative'' for gold, said William O'Neill, a partner at Logic Advisors in Upper Saddler River, New Jersey. ``The dollar is the key to the recent slide, with oil taking on a secondary role. I see gold falling below $850 next week.''
Crude oil dropped as low as $133.46 a barrel today. The record high is $139.12.
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
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June 13 (Bloomberg) -- Gold rose, erasing earlier losses, on speculation that higher food and energy costs will spur inflation and boost demand for precious metals as a hedge against inflation. Silver also climbed.
A government report showed U.S. consumer prices last month rose 0.6 percent, the most since November. Corn touched a record for a seventh straight session today. Soybeans, wheat and rice prices have climbed to all-time highs this year, and crude oil more than doubled in the past year as gold gained 34 percent.
``Real interest rates remain negative,'' said James Turk, the founder of GoldMoney.com, which held $352 million in gold and silver in storage for investors at the end of May. ``Inflation is greater than the interest income you can earn on your dollars, so after adjusting for inflation, you are losing purchasing power.''
Gold futures for August delivery rose $1.10, or 0.1 percent, to $873.10 an ounce on the Comex division of the New York Mercantile Exchange. Gold touched a record $1,033.90 on March 17. This week, the price has dropped 2.9 percent, the second decline in three weeks.
Silver futures for July delivery gained 7.5 cents, or 0.5 percent, to $16.56 an ounce on the Comex. The price advanced 11 percent this year, while gold climbed 4.2 percent.
Consumer prices rose 4.2 percent in the 12 months ending May 31, the Labor Department said today. Gold rallied 31 percent last year as consumer costs accelerated 4.1 percent, the most in 17 years.
Dollar, Oil
Still, gold traded lower most of the session as the dollar headed for the biggest weekly gain in three years against the euro. Crude-oil prices dropped 2.5 percent this week after climbing 8.8 percent last week.
The U.S. currency climbed on speculation the Federal Reserve will raise interest rates to contain inflation.
Gold rallied 39 percent from Sept. 17 to March 17 as the Fed slashed borrowing costs, after a housing slump and a credit squeeze threatened to push the U.S. economy into a recession.
The benchmark federal-funds rate is at 2 percent, down from 5.25 percent in mid-September after seven reductions. Interest- rate futures show a 50 percent chance the Fed may raise the rate to 2.25 percent by Aug. 5, compared with no chance a month ago.
``The specter of higher interest rates is negative'' for gold, said William O'Neill, a partner at Logic Advisors in Upper Saddler River, New Jersey. ``The dollar is the key to the recent slide, with oil taking on a secondary role. I see gold falling below $850 next week.''
Crude oil dropped as low as $133.46 a barrel today. The record high is $139.12.
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
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Yuan Has Second Winning Week as China Seeks to Tackle Inflation
By Judy Chen and Belinda Cao
June 13 (Bloomberg) -- The yuan completed a second week of gains on speculation policy makers are seeking a stronger currency to slow inflation.
The yuan has appreciated 1.6 percent versus the dollar this quarter, the best performance among the 10 most-traded currencies in Asia outside Japan. A government report showed yesterday that China's money supply grew in May at the fastest pace in four months, adding pressure on the central bank to rein in inflation.
``China still needs a stronger yuan to curb imported inflation,'' said Tang Liang, a foreign-exchange trader at the Beijing branch of Industrial & Commercial Bank of China Ltd., the nation's largest bank. ``The market is not optimistic about slowing inflation for the rest of this year as non-food inflationary pressure is increasing.''
The currency climbed 0.31 percent to 6.9018 a dollar as of 5:30 p.m. in Shanghai, from 6.9230 last week, according to the China Foreign Exchange Trade System. The yuan is allowed to trade by up to 0.5 percent against the dollar on either side of a reference rate fixed by the central bank each day. The rate was set at 6.9018 today.
M2, the broadest measure of money supply, rose 18.1 percent in May from a year earlier to 43.6 trillion yuan ($6.3 trillion), the People's Bank of China said yesterday. The gauge increased 16.9 percent in April. Economists in a Bloomberg survey had predicted a 17 percent expansion.
`Not Smart'
Inflation slowed to 7.7 percent in May, from 8.5 percent in April, still exceeding the government's annual target of 4.8 percent, according to the statistics bureau yesterday.
China, which invests up to a third of its $1.68 trillion in foreign exchange reserves in Treasuries, is ``not smart'' to invest in U.S. debt and should seek higher returns, said Cheng Siwei, former vice chairman of the National People's Congress, the country's top legislature.
``I don't think it's a smart move to invest in U.S. government bonds,'' said Cheng at a conference in Beijing today. ``We need smart capitalists to invest ourselves.'' The comment was his personal opinion, not government policy, Cheng said.
Government bonds were little changed after rebounding yesterday from a loss earlier this week following a central bank order to raise bank's deposit reserves.
Tightening Policy
Local debt securities lost almost 1 percent on June 10 and 11 after a Chinese holiday, according to an Asian local-currency debt index compiled by HSBC Holdings Plc. The central bank ordered lenders on June 7 to set aside 1 percentage point more of their deposits as reserves, to be paid June 15 and 25.
The securities started to rebound yesterday, with the yields declining 1.2 basis point on average, according to a data posted on Chinabond.com, a Web site run by the government's biggest debt clearing house.
``Bonds moved little in trading as people's worries about funding abated,'' said Xie Xin, a bond trader with Industrial Bank Co. Ltd. in Shanghai. ``Funding costs between banks slid again today.''
The seven-day repo fixing rate, a measure for lending costs in the money market, declined for a third day to 3.34 percent, matching that before the central bank's notice, according to the National Interbank Funding Center.
The Agricultural Development Bank of China sold 10 billion yuan ($1.45 billion) in five-year floating-rate notes today at a spread of 65 basis points more than the benchmark one-year deposit rate of 4.14 percent. The auction drew bids 2.3 times the planned size. A basis point is 0.01 percentage point.
``Investors seemed to have more demand for floating-rate debt when there isn't favorable news for the market,'' said He Xiuhong, a fixed-income analyst at GF Securities Co. in Guangzhou, the nation's third-largest brokerage by revenue.
The yield on the 4.41 percent treasury bond due December 2017 held at 4.25 percent, according to the China Interbank Bond Market. The price of the security was 101.22 per 100 yuan face amount.
To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net; Belinda Cao in Beijing at lcao4@bloomberg.net.
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June 13 (Bloomberg) -- The yuan completed a second week of gains on speculation policy makers are seeking a stronger currency to slow inflation.
The yuan has appreciated 1.6 percent versus the dollar this quarter, the best performance among the 10 most-traded currencies in Asia outside Japan. A government report showed yesterday that China's money supply grew in May at the fastest pace in four months, adding pressure on the central bank to rein in inflation.
``China still needs a stronger yuan to curb imported inflation,'' said Tang Liang, a foreign-exchange trader at the Beijing branch of Industrial & Commercial Bank of China Ltd., the nation's largest bank. ``The market is not optimistic about slowing inflation for the rest of this year as non-food inflationary pressure is increasing.''
The currency climbed 0.31 percent to 6.9018 a dollar as of 5:30 p.m. in Shanghai, from 6.9230 last week, according to the China Foreign Exchange Trade System. The yuan is allowed to trade by up to 0.5 percent against the dollar on either side of a reference rate fixed by the central bank each day. The rate was set at 6.9018 today.
M2, the broadest measure of money supply, rose 18.1 percent in May from a year earlier to 43.6 trillion yuan ($6.3 trillion), the People's Bank of China said yesterday. The gauge increased 16.9 percent in April. Economists in a Bloomberg survey had predicted a 17 percent expansion.
`Not Smart'
Inflation slowed to 7.7 percent in May, from 8.5 percent in April, still exceeding the government's annual target of 4.8 percent, according to the statistics bureau yesterday.
China, which invests up to a third of its $1.68 trillion in foreign exchange reserves in Treasuries, is ``not smart'' to invest in U.S. debt and should seek higher returns, said Cheng Siwei, former vice chairman of the National People's Congress, the country's top legislature.
``I don't think it's a smart move to invest in U.S. government bonds,'' said Cheng at a conference in Beijing today. ``We need smart capitalists to invest ourselves.'' The comment was his personal opinion, not government policy, Cheng said.
Government bonds were little changed after rebounding yesterday from a loss earlier this week following a central bank order to raise bank's deposit reserves.
Tightening Policy
Local debt securities lost almost 1 percent on June 10 and 11 after a Chinese holiday, according to an Asian local-currency debt index compiled by HSBC Holdings Plc. The central bank ordered lenders on June 7 to set aside 1 percentage point more of their deposits as reserves, to be paid June 15 and 25.
The securities started to rebound yesterday, with the yields declining 1.2 basis point on average, according to a data posted on Chinabond.com, a Web site run by the government's biggest debt clearing house.
``Bonds moved little in trading as people's worries about funding abated,'' said Xie Xin, a bond trader with Industrial Bank Co. Ltd. in Shanghai. ``Funding costs between banks slid again today.''
The seven-day repo fixing rate, a measure for lending costs in the money market, declined for a third day to 3.34 percent, matching that before the central bank's notice, according to the National Interbank Funding Center.
The Agricultural Development Bank of China sold 10 billion yuan ($1.45 billion) in five-year floating-rate notes today at a spread of 65 basis points more than the benchmark one-year deposit rate of 4.14 percent. The auction drew bids 2.3 times the planned size. A basis point is 0.01 percentage point.
``Investors seemed to have more demand for floating-rate debt when there isn't favorable news for the market,'' said He Xiuhong, a fixed-income analyst at GF Securities Co. in Guangzhou, the nation's third-largest brokerage by revenue.
The yield on the 4.41 percent treasury bond due December 2017 held at 4.25 percent, according to the China Interbank Bond Market. The price of the security was 101.22 per 100 yuan face amount.
To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net; Belinda Cao in Beijing at lcao4@bloomberg.net.
Read more...
Dollar Rises Most Since 2005 as Bernanke Cites Reduced Risk
By Bo Nielsen
June 14 (Bloomberg) -- The dollar rose the most against the euro since 2005 as Federal Reserve Chairman Ben S. Bernanke said economic risks have faded, raising speculation policy makers will increase borrowing costs this year to contain inflation.
The greenback rose to a one-month high this week as Treasury Secretary Henry Paulson declined to rule out intervention to support the dollar and U.S. retail sales increased in May twice as much as economists forecast. Group of Eight finance ministers meeting this weekend in Japan may signal that they favor a stronger U.S. currency.
``Risks to U.S. growth have been reduced, and the market is now thinking the Fed will hike in August,'' said Meg Browne, a senior currency strategist at Brown Brothers Harriman & Co. in New York. ``That's a big shift, and the effect on the dollar was positive.''
The dollar increased 2.5 percent to $1.5380 per euro, from $1.5778 on June 6. It touched $1.5303, the strongest level since May 8. The U.S. currency rose 3 percent to 108.19 against the yen, from 104.93, and touched 108.38, the highest since Feb. 14. It was the biggest gain since December 2004. Japan's currency fell for a fifth consecutive week against the euro, decreasing 0.6 percent to 166.35, from 165.64. It's the longest stretch of gains since October.
``We've seen a very sharp reversal of sentiment about the dollar,'' said Nick Bennenbroek, head of currency research at Wells Fargo & Co. in New York. ``The U.S. economy seems reasonably resilient, and the Fed is beginning to look hawkish.''
Chinese Yuan
The Chinese yuan rose for a second consecutive week versus the dollar, increasing 0.3 percent to 6.9022, on speculation policy makers are seeking a stronger currency to control inflation. The U.S. wants China to keep allowing its currency to rise against the dollar and will discuss that stance in talks next week in Maryland, said Alan Holmer, the U.S. Treasury's top China negotiator, in a briefing in Washington yesterday.
The Australian dollar fell 2.6 percent this week against its U.S. counterpart, the biggest decline in almost three months, and the New Zealand currency declined 2.4 percent, for its third consecutive weekly decrease. Traders speculated an increase in U.S. interest rates will narrow the yield advantage of Australian and New Zealand debt.
Fed funds futures on the Chicago Board of Trade show a 60 percent chance the U.S. central bank will increase the 2 percent target lending rate by at least a quarter-percentage point at its August meeting, compared with 9 percent odds a week ago. There are 21 percent odds policy makers will lift the rate to 3 percent by December.
Yield Spread
The yield advantage of a two-year German bund over a comparable Treasury note fell to 1.58 percentage points, making dollar-denominated assets more attractive. The difference was 2.26 percentage points on June 6, the widest since 1993.
``People are getting ahead of themselves'' betting on Fed rate increases, said David Powell, a currency strategist at Bank of America Corp. in New York. ``The dollar is a bit overshot at this stage.'' He predicted the Fed will raise borrowing costs to 2.25 percent this year.
U.S. retail sales increased 1 percent in May, following a revised 0.4 percent advance the prior month, the Commerce Department reported on June 12. Consumer prices rose 0.6 percent last month after a 0.2 percent increase in April, the Labor Department reported yesterday in Washington.
``The risk that the economy has entered a substantial downturn appears to have diminished,'' Bernanke said in a speech at a Boston Fed conference on June 9. ``The Federal Open Market Committee will strongly resist an erosion of longer-term inflation expectations.''
Bernanke on Currency
Bernanke said on June 3 that he's aware of the impact a falling currency can have on price expectations. Paulson said in an interview with CNBC on June 9 that he would ``never'' rule out currency intervention.
The 15-nation euro weakened yesterday as Irish voters turned down the European Union's new governing treaty, a setback for the bloc's plans to strengthen its global voice.
French Finance Minister Christine Lagarde, before meeting with her G-8 counterparts in Osaka, Japan, told reporters that the U.S. dollar's increase versus the euro is ``very satisfying.'' The group comprises the U.S., Japan, Germany, the U.K., France, Italy, Canada and Russia.
``If the G-8 this weekend doesn't come out with a stronger statement, the gains we have seen in the dollar this week will disappear very soon,'' said Michael Metcalfe, London-based head of macro strategy at State Street Global Markets, in an interview on Bloomberg Television.
Currency Intervention
The last time the major industrialized countries intervened was on Sept. 22, 2000, when they bought the euro after it tumbled 27 percent from its 1999 debut. They last propped up the dollar in 1995, when it sank almost 20 percent in four months against the Japanese yen to a post-World War II low of 79.95. Central banks intervene in currency markets by arranging purchases or sales of foreign exchange.
The yen weakened this week after Bank of Japan Governor Masaaki Shirakawa and his six colleagues left the overnight lending rate at 0.5 percent, the lowest among major economies, in a unanimous vote in Tokyo.
To contact the reporter on this story: Bo Nielsen in New York at bnielsen4@bloomberg.net
Last Updated: June 13, 2008 19:07 EDT
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June 14 (Bloomberg) -- The dollar rose the most against the euro since 2005 as Federal Reserve Chairman Ben S. Bernanke said economic risks have faded, raising speculation policy makers will increase borrowing costs this year to contain inflation.
The greenback rose to a one-month high this week as Treasury Secretary Henry Paulson declined to rule out intervention to support the dollar and U.S. retail sales increased in May twice as much as economists forecast. Group of Eight finance ministers meeting this weekend in Japan may signal that they favor a stronger U.S. currency.
``Risks to U.S. growth have been reduced, and the market is now thinking the Fed will hike in August,'' said Meg Browne, a senior currency strategist at Brown Brothers Harriman & Co. in New York. ``That's a big shift, and the effect on the dollar was positive.''
The dollar increased 2.5 percent to $1.5380 per euro, from $1.5778 on June 6. It touched $1.5303, the strongest level since May 8. The U.S. currency rose 3 percent to 108.19 against the yen, from 104.93, and touched 108.38, the highest since Feb. 14. It was the biggest gain since December 2004. Japan's currency fell for a fifth consecutive week against the euro, decreasing 0.6 percent to 166.35, from 165.64. It's the longest stretch of gains since October.
``We've seen a very sharp reversal of sentiment about the dollar,'' said Nick Bennenbroek, head of currency research at Wells Fargo & Co. in New York. ``The U.S. economy seems reasonably resilient, and the Fed is beginning to look hawkish.''
Chinese Yuan
The Chinese yuan rose for a second consecutive week versus the dollar, increasing 0.3 percent to 6.9022, on speculation policy makers are seeking a stronger currency to control inflation. The U.S. wants China to keep allowing its currency to rise against the dollar and will discuss that stance in talks next week in Maryland, said Alan Holmer, the U.S. Treasury's top China negotiator, in a briefing in Washington yesterday.
The Australian dollar fell 2.6 percent this week against its U.S. counterpart, the biggest decline in almost three months, and the New Zealand currency declined 2.4 percent, for its third consecutive weekly decrease. Traders speculated an increase in U.S. interest rates will narrow the yield advantage of Australian and New Zealand debt.
Fed funds futures on the Chicago Board of Trade show a 60 percent chance the U.S. central bank will increase the 2 percent target lending rate by at least a quarter-percentage point at its August meeting, compared with 9 percent odds a week ago. There are 21 percent odds policy makers will lift the rate to 3 percent by December.
Yield Spread
The yield advantage of a two-year German bund over a comparable Treasury note fell to 1.58 percentage points, making dollar-denominated assets more attractive. The difference was 2.26 percentage points on June 6, the widest since 1993.
``People are getting ahead of themselves'' betting on Fed rate increases, said David Powell, a currency strategist at Bank of America Corp. in New York. ``The dollar is a bit overshot at this stage.'' He predicted the Fed will raise borrowing costs to 2.25 percent this year.
U.S. retail sales increased 1 percent in May, following a revised 0.4 percent advance the prior month, the Commerce Department reported on June 12. Consumer prices rose 0.6 percent last month after a 0.2 percent increase in April, the Labor Department reported yesterday in Washington.
``The risk that the economy has entered a substantial downturn appears to have diminished,'' Bernanke said in a speech at a Boston Fed conference on June 9. ``The Federal Open Market Committee will strongly resist an erosion of longer-term inflation expectations.''
Bernanke on Currency
Bernanke said on June 3 that he's aware of the impact a falling currency can have on price expectations. Paulson said in an interview with CNBC on June 9 that he would ``never'' rule out currency intervention.
The 15-nation euro weakened yesterday as Irish voters turned down the European Union's new governing treaty, a setback for the bloc's plans to strengthen its global voice.
French Finance Minister Christine Lagarde, before meeting with her G-8 counterparts in Osaka, Japan, told reporters that the U.S. dollar's increase versus the euro is ``very satisfying.'' The group comprises the U.S., Japan, Germany, the U.K., France, Italy, Canada and Russia.
``If the G-8 this weekend doesn't come out with a stronger statement, the gains we have seen in the dollar this week will disappear very soon,'' said Michael Metcalfe, London-based head of macro strategy at State Street Global Markets, in an interview on Bloomberg Television.
Currency Intervention
The last time the major industrialized countries intervened was on Sept. 22, 2000, when they bought the euro after it tumbled 27 percent from its 1999 debut. They last propped up the dollar in 1995, when it sank almost 20 percent in four months against the Japanese yen to a post-World War II low of 79.95. Central banks intervene in currency markets by arranging purchases or sales of foreign exchange.
The yen weakened this week after Bank of Japan Governor Masaaki Shirakawa and his six colleagues left the overnight lending rate at 0.5 percent, the lowest among major economies, in a unanimous vote in Tokyo.
To contact the reporter on this story: Bo Nielsen in New York at bnielsen4@bloomberg.net
Last Updated: June 13, 2008 19:07 EDT
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