By Ye Xie
Jan. 29 (Bloomberg) -- The dollar declined against the yen as government reports showed orders for U.S. durable goods dropped in December and the number of Americans receiving unemployment benefits soared to a record.
The yen gained versus the Australian dollar and the Mexican peso as investors sought refuge in Japan’s currency from economic turmoil. Russia’s ruble had its biggest two-day drop in a decade against the dollar less than a week after Prime Minister Vladimir Putin defended the policy of devaluing the currency “gradually and carefully.”
“The conditions are very weak in the U.S.,” said Benedikt Germanier, a currency strategist at UBS AG in Stamford, Connecticut. “Japanese investors will send money back home.”
The U.S. currency fell 0.5 percent to 89.92 yen at 9:12 a.m. in New York, from 90.26 yesterday. The dollar traded at $1.3158 per euro, compared with $1.3166. The yen strengthened 0.6 percent to 118.19 per euro from 118.88.
The ruble declined as much as 3.1 percent to 34.7990 per dollar, bringing its loss over the past two days to 5.6 percent, the most since March 1999, after the central bank said foreign- exchange reserves fell $9.7 billion last week to $386.5 billion. The currency is approaching the 36 per dollar level that the central bank pledged to defend.
Putin said in an interview on Bloomberg Television this week that Russia set itself apart from other countries by using reserves so as not to “crush the national currency overnight,” avoiding a repeat of the 1998 crisis when the currency fell as much as 29 percent in a day.
New Zealand’s Cut
New Zealand’s dollar dropped as much as 2.2 percent to 51.28 U.S. cents, the lowest level since December 2002, after the Reserve Bank cut its official cash rate by 1.5 percentage points to a record low of 3.5 percent.
Continuing claims for U.S. unemployment benefits rose to 4.776 million in the week ended Jan. 17, the highest since record keeping started in 1967, the Labor Department said today in Washington. First-time filings increased to 588,000 in the week ended Jan. 24.
Durable goods declined 2.6 percent last month, following a 3.7 percent drop in November, the Commerce Department said. The median forecast of 75 economists surveyed by Bloomberg News was for a 2 percent decline.
The Federal Reserve held its target lending rate in a range of zero to 0.25 percent yesterday and said it’s prepared to purchase Treasury securities to resuscitate lending.
Fed on Treasuries
The central bank is “prepared to purchase longer-term Treasury securities if evolving circumstances indicate that such transactions would be particularly effective in improving conditions in private credit markets,” the Federal Open Market Committee said in a statement after meeting in Washington.
The Fed last cut its target lending rate on Dec. 16 and shifted its focus to the amount and type of debt it buys. It’s seeking to revive credit markets after financial institutions worldwide posted $1 trillion in losses on mortgage-related securities since the start of 2007.
The central bank began a $500 billion program this month to buy Fannie Mae, Freddie Mac and Ginnie Mae mortgage securities, pushing down the yields on mortgage bonds relative to Treasuries.
The euro earlier traded lower versus the dollar after the European Commission said its index of executive and consumer sentiment declined to a record low in January. The index fell to 68.9, the lowest level since it was started in 1985, from a revised 70.4 in December.
Trichet on Rates
European Central Bank President Jean-Claude Trichet said yesterday in an interview on Bloomberg Television at the World Economic Forum in Davos, Switzerland, before the Fed’s decision that “very, very low” interest rates “have some inconveniences.”
Trichet reiterated that the ECB’s next important meeting is in March, signaling policy makers won’t cut interest rates next week. The central bank lowered its benchmark rate on Jan. 15 by a half-percentage point to 2 percent, matching a record low.
To contact the reporter on this story: Ye Xie in New York at yxie6@bloomberg.net
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