By Yoshiaki Nohara and Ron Harui
Oct. 6 (Bloomberg) -- The dollar fell for a second day against the yen as the Independent newspaper said Gulf states may switch to a basket of currencies including the yen and euro for oil trading.
The dollar declined against 14 of its 16 major counterparts as Asian stocks rallied and the Independent cited banking sources in Hong Kong as saying Gulf states along with Japan and China discussed dropping the greenback for oil trades. The yen rose after Japan’s finance minister said he told Group of Seven leaders weak-currency policies were undesirable. Australia’s dollar surged after the nation’s central bank unexpectedly raised benchmark interest rates.
“Eventually there will be a move to non-dollar commodity contracts, and it may be the next big risk for the dollar,” said Ben Simpfendorfer, chief China economist for Royal Bank of Scotland Group Plc in Hong Kong. “At the same time, I don’t want to overplay the importance of the story. There’s no credible sources there.”
The dollar fell to 89.03 yen at 6:16 a.m. in London from 89.53 yen in New York yesterday. The euro climbed to $1.4719 from $1.4648. The 16-nation currency fetched 131.05 yen from 131.15 yen.
The dollar weakened after the U.K.-based Independent reported oil-producing Gulf nations are seeking to move to a basket of currencies to settle transactions.
“A move by the Arab states to use a currency basket that consists of the yen, the euro and other instruments will definitely prove positive for those assets,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “This is likely to fuel buying of the Japanese and European currencies at the expense of the greenback.”
Rising Stocks
The Dollar Index fell for a third day as the MSCI Asia Pacific Index of regional shares gained 1 percent, weakening demand for safe-haven currencies. The index, which the ICE uses to track the dollar against the currencies of six major U.S. trading partners including the euro, dropped 0.3 percent to 76.433.
“Evidence suggests the global economy is recovering,” said Greg Gibbs, a Sydney-based currency strategist with Royal Bank of Scotland Group Plc. “The dollar may weaken, which has been a trend of recent weeks. Certainly, strong equities enforce that trend.”
Fujii Comments
The yen gained against 13 of its 16 major counterparts after Japanese Finance Minister Hirohisa Fujii said he told officials from the Group of Seven nations meeting in Istanbul last weekend that governments shouldn’t pursue policies that seek to devalue their currencies.
“I made the point that it’s undesirable for individual nations to take a weak-currency policy,” Fujii said at a news conference in Tokyo today. “Currency devaluation policies back in the 1930s had an adverse impact on the global economy and politics.”
Fujii said earlier last month he didn’t support a weak currency. In Istanbul he said that Japan would “take action” if currencies show excessive moves. The yen has gained 14 percent against the dollar in the past year, hurting earnings for export-dependent Japanese companies.
“The market is interpreting his latest comments as signs the government will let the yen keep rising,” said Yoh Nihei, trading group manager at Tokai Tokyo Securities Co. in Tokyo. “The yen is benefiting from that.”
The Australian dollar jumped 1 percent to 88.64 U.S. cents after the Reserve Bank of Australia raised its benchmark interest rate from a 49-year low by a quarter percentage point amid signs the nation’s economy is strengthening.
Reserve Bank Governor Glenn Stevens increased the overnight cash rate target to 3.25 percent from 3 percent in Sydney today. Only one of 20 economists surveyed by Bloomberg News forecast today’s decision. The rest predicted no change.
‘Solid Economic Data’
Australia is the first Group of 20 nation to raise borrowing costs since the start of the global financial crisis more than a year ago.
The euro gained before a report forecast to show German factory orders increased for a sixth month. The Economy Ministry in Berlin is forecast to report Germany’s factory orders advanced 1.1 percent in August following a 3.5 increase in July, according to the median estimate of economists in a Bloomberg News survey. The data is due tomorrow.
“Solid economic data in Germany are good for the euro- zone’s economy, boosting demand for the euro,” said Toshiya Yamauchi, a Tokyo-based manager of the foreign-exchange margin trading department at Ueda Harlow Ltd. “Rising stocks are also encouraging risk taking, and the yen and dollar are under pressure.”
To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.
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