By Catarina Saraiva and Keith Jenkins - Nov 2, 2011 10:34 PM GMT+0700
Nov. 2 (Bloomberg) -- Steven Saywell, head of foreign-exchange strategy for Europe at BNP Paribas SA, talks about Greek Prime Minister George Papandreou's call for a referendum on Europe's rescue package and its impact on the euro. He speaks with Maryam Nemazee on Bloomberg Television's "The Pulse." (Source: Bloomberg)
The dollar fell from a three-week high against the euro on speculation the Federal Reserve will signal today it’s moving toward a third round of asset purchases, or quantitative easing, to spur economic growth.
The U.S. currency declined for the first time in three days versus the yen amid speculation unemployment above 9 percent may spur the Fed to act. South Africa’s rand and Canada’s dollar rallied as stocks gained following two days of losses. The euro rose versus most major peers after Greece’s Cabinet backed Prime Minister George Papandreou’s call for a bailout-plan referendum.
“The markets are starting to price in some prospect of QE3,” said Paresh Upadhyaya, head of Americas G-10 currency strategy at Bank of America Corp. in New York. “We’re likely to be sorely disappointed, with the Fed unlikely to introduce anything new. The markets are distracted with the events going on in peripheral Europe and in euro land as a whole, which are overshadowing everything else.”
The dollar weakened 0.8 percent to $1.3809 per euro at 11:33 a.m. in New York. The greenback climbed to $1.3609 versus the euro yesterday, the strongest since Oct. 12. The U.S. currency slid 0.5 percent to 78.01 yen. The euro rose 0.3 percent to 107.70 yen.
Fed officials are probably engineering additional asset purchases, while they are unlikely to announce a decision at the end of their two-day meeting today, according to economists surveyed by Bloomberg. Sixty-nine percent said Chairman Ben S. Bernanke will embark on a third round of quantitative easing, with 36 percent predicting the move will come in the first quarter next year, according to the poll taken Oct. 26 to 31.
Communication Strategy
Sixty-three percent of the economists said policy makers would first alter their communication strategy by clarifying how they align policy with inflation and unemployment rates.
Fed Vice Chairman Janet Yellen and Chicago Fed President Charles Evans said in speeches last month that more action may be needed to reduce an unemployment rate stuck around 9 percent.
The U.S. jobless rate held at 9.1 percent for a fourth straight month in October, another Bloomberg survey forecast before the government reports the data Nov. 4. The rate has been at or above 9 percent since April 2009 except for two months early this year. The average for the past decade is 6.4 percent.
“It might be a tough balancing act for the Fed,” said Joe Manimbo, a market analyst in Washington at Travelex Global Business Payments, a currency-exchange network. “They might not want to risk another leg lower in risky assets if they don’t signal that they’re ready to offer support.”
Stocks, Commodities
The Standard & Poor’s 500 Index rose 1.9 percent after plunging for the first two days of the week as investors shunned higher-yielding assets amid turmoil over efforts to curb Europe’s debt crisis. The Thomson Reuters/Jefferies CRB Index of raw materials rose 1 percent in its first gain in four days.
South Africa’s rand was the biggest winner versus the dollar, climbing 1.8 percent to 7.9562 after losing almost 5 percent in the week’s first two days. Canada’s dollar gained 0.9 percent to $1.0114 after falling for the past three days.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major trading partners, dropped 0.7 percent to 76.796.
The euro advanced against 12 of its 16 most-traded counterparts after a Greek official said the Cabinet gave Papandreou unanimous backing for his call for a national vote on the European Union’s latest rescue package. Government spokesman Elias Mosialos said the referendum will be held “as soon as possible,” and that a vote of confidence in Parliament is scheduled to begin today.
No Alternative
European leaders are set to tell Papandreou he has no alternative to the budget cuts imposed in a week-old debt-crisis strategy that they are racing to prevent from unraveling. Global stocks, the euro and bonds of debt-strapped countries tumbled yesterday as concern of a disorderly Greek default mounted.
The Greek prime minister will travel to Cannes, France, today to brief German Chancellor Angela Merkel, French President Nicolas Sarkozy and other officials on the eve of a Group of 20 summit on the debt crisis.
The Japanese currency strengthened against the dollar after sliding 3.4 over the past two days. Japan’s government intervened on Oct. 31, selling yen to weaken the currency after it appreciated to a post-World War II high of 75.35 per dollar.
The yen tends to strengthen in periods of financial turmoil because the nation’s current-account surplus makes it less reliant on foreign capital.
Japan’s currency dropped the most in the past week against the currencies of nine developed-nation counterparts, falling 3.4 percent, according to Bloomberg Correlation-Weighted Currency Indexes. The dollar gained 0.9 percent in that time and the euro added 0.5 percent.
Companies in the U.S. added 110,000 workers to payrolls, according to data today from Roseland, New Jersey-based ADP Employer Services, compared with a revised 116,000 in September. The median forecast in a Bloomberg News survey called for an advance of 100,000 from an earlier estimate of 91,000.
To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Keith Jenkins in London at kjenkins3@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
Posts
No comments:
Post a Comment