The euro traded near a seven-week low against the dollar amid concern a failure to craft a rescue package for Ireland will allow the nation’s banking crisis to spread to other member states of the common currency.
The dollar rose versus the yen for a seventh straight day, marking a six-week high and the longest run of gains since 1995. The Australian and New Zealand dollars traded near the lowest levels in more than two weeks as declines in stocks and concern that China will take measures to cool inflation damped demand for higher-yielding assets.
“Concerns about the region’s debt crisis weigh on the euro,” said Jeremy Stretch, executive director of foreign- exchange strategy at Canadian Imperial Bank of Commerce in London. “That’s given the dollar a boost, and the euro stays under pressure. Ireland’s problem is not so much a sovereign issue as a banking issue.”
The euro was at $1.3487 as of 8:01 a.m. in London from $1.3489 in New York yesterday, when it touched $1.3448, the weakest level since Sept. 28. The shared currency traded at 112.55 yen from 112.38 yen after dropping 0.4 percent yesterday. The greenback fetched 83.43 yen from 83.29 yen. Yesterday, it reached 83.59 yen, the highest level since Oct. 5.
“The rebound in the dollar is beneficial for the Japanese economy,” Stretch said. “Dollar-yen is squeezing up and that will help alleviate some of the nation’s export pressures.”
EU, IMF Talks
Ireland is negotiating with the European Union and International Monetary Fund about aid to shore up the state’s finances, furnish capital for the country’s banks and spare the nation from tapping the bond market for an extended period, a European official said on condition of anonymity.
European finance ministers started work on possible aid for Ireland’s debt-laden banks, stopping short of an immediate bailout package. Finance chiefs from the 16-country euro region lauded Ireland’s budget cuts, echoing the rhetorical support offered in the early stages of Greece’s debt trauma before a rescue became necessary. Ireland said it doesn’t need EU money.
Irish Prime Minister Brian Cowen told Parliament in Dublin the nation hasn’t lodged an aid request and the goal is “a credible, efficient and above all workable solution that will provide assurance to the markets.”
Dollar ‘Bias’
“Investors are poised to unwind their positions rather than adding new ones amid Europe’s lingering issues, and the bias is for the dollar to be bought,” said Kuniyuki Hirai, manager of foreign-exchange trading at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s largest lender. “The euro will struggle to rise toward year-end.”
Austrian Finance Minister Josef Proell said he’s considering withholding his country’s share of the next part of Greece’s 110 billion-euro ($148 billion) rescue, saying the Athens government missed a revenue-raising target. Greece’s near-default in May triggered Europe’s sovereign-debt crisis.
The euro has lost 7.4 percent this year against its developed-nation counterparts, Bloomberg Correlation-Weighted Currency Indexes show. The dollar is down 1 percent, while the yen has gained 12 percent, the indexes show.
The dollar was supported as Atlanta Federal Reserve President Dennis Lockhart said additional bond purchases by the central bank aren’t intended to weaken the greenback.
Fed Outlook
Lockhart said the program to buy $600 billion in Treasuries is not intended to weaken the dollar or monetize the debt. The effect of the policy would be “measured,” Lockhart said in remarks prepared for a speech in Montgomery, Alabama.
The Fed announced on Nov. 3 it would make the bond purchases, a program known as quantitative easing, through June. Boston Fed President Eric Rosengren is set to speak at a chamber of commerce breakfast in Providence, R.I., and St. Louis Fed President James Bullard will speak in St. Louis today.
The dollar’s gains may be limited as reports today are forecast to show U.S. inflation was contained and housing starts dropped to a three-month low.
“Employment and housing haven’t recovered much at all,” said Tetsuya Inoue, chief researcher for financial markets at Nomura Research Institute in Tokyo, a unit of Japan’s largest brokerage. “Weak credit conditions in the U.S. may prompt people to invest money abroad. As a result, the dollar will be under downward pressure.”
Inflation, Housing
U.S. consumer prices, excluding food and fuel costs, rose 0.7 percent in October from a year ago after gaining 0.8 percent in September, according to the median estimate of economists in a Bloomberg News survey before today’s data. Housing starts grew at a 598,000 annual rate last month, the least since July and down from a 610,000 rate in September, another survey showed.
The euro gained against the yen as the common currency climbed above the so-called cloud of the daily ichimoku chart after entering it yesterday.
Ichimoku analysis, developed by a Japanese journalist, is used to predict a currency’s direction through analyzing the midpoints of historical highs and lows.
Australia’s currency touched 97.25 U.S. cents yesterday, the weakest since Oct. 29, after Chinese Premier Wen Jiabao said the cabinet is drafting steps to counter excessive price gains.
“The Aussie dollar has been directly affected by the movement we’ve seen in risk appetite because of China tightening concerns and news from the euro zone,” said Ray Attrill, head of macro strategy in Sydney at Tallship Investments, a currency fund manager.
Australia’s currency traded at 97.38 U.S. cents from 97.67 cents. New Zealand’s dollar was at 76.41 cents from 76.78 cents. The so-called kiwi reached 76.39 cents earlier today, the lowest since Nov. 2.
The MSCI World Index of shares fell for the eighth straight day, dropping 0.3 percent.
To contact the reporters on this story: Keith Jenkins in London at kjenkins3@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
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