Dollar in Tightest Range Since 2012 as Stimulus Saps Volatility
Frankfurt (June 25) The dollar was set for the tightest quarterly trading range in almost two years versus the yen as stimulus from central banks in the world’s biggest economies pushes price swings to record lows.
The 3.31-yen difference between the dollar’s high of 104.13 yen and low of 100.82 yen this quarter is the smallest since the three months ended September 2012, according to data compiled by Bloomberg. The gap of 4.9 U.S. cents between the euro’s strongest level of $1.3993 and weakest of $1.3503 over the same period matches the least since the second quarter of 2007.
“Volatility is justifiably low because central-bank liquidity is ample,” said Kiran Kowshik, a currency strategist at BNP Paribas SA in London. “The majors are not the thing to look at, you need to look at high yield versus low yield, because that’s what the market is doing. You may still get spikes in volatility from idiosyncratic events.”
A gauge of the dollar’s strength was about 0.2 percent from the lowest in a month before a report today analysts said will show the U.S. economy shrank more than previously estimated, underpinning bets the Federal Reserve will keep interest rates near zero. Indonesia’s rupiah slid to the lowest level since February as the central bank said it will allow weakness in the currency to help exports. The Norwegian krone and Swedish krona were the biggest losers in developed markets with South Korea’s won.
Low Volatility
The dollar fell less than 0.1 percent to 101.91 yen at 7:35 a.m. New York time, set for a 1.3 percent drop this quarter. The euro was at $1.3608, having fallen 1.2 percent since March 31, set for its first quarterly slide since the three months through March 2013. The common currency was little changed today at 138.68 yen.
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major counterparts, was little changed at 1,010.02 after falling to 1,008.19 on June 19, the lowest since May 21.
A Deutsche Bank AG gauge of currency market volatility fell to 5.32 percent, approaching the record-low close of 5.28 percent on June 19.
Price swings in currency markets have diminished this year as central banks pledge to keep down interest rates to spur growth. The Fed last week reduced its outlook for economic growth and held its target for short-term interest rates at virtually zero, where it has been since December 2008. Fed Chair Janet Yellen said the central bank plans to keep its interest-rate target low for a considerable time after it ends bond buying.
‘Tight Ranges’
The European Central Bank has cut its deposit rate to minus 0.1 percent, lowered the main refinancing rate to a record 0.15 percent, and announced measures including targeted longer-term loans. The Bank of Japan said this month it would continue to expand the monetary base at a pace of 60 trillion yen to 70 trillion yen per year.
“Traders tend to feel that a lot is out of their control with central banks being active,” said Stan Shamu, a markets strategist in Melbourne at IG Ltd. “That’s one of the main reasons why we’ve seen these tight ranges being maintained.”
The yen rose versus most of its major peers today while South Korea’s won fell as violence in Iraq sapped risk appetite. The Wall Street Journal reported Syrian warplanes killed at least 50 people in the Iraqi province of Anbar yesterday.
Source: Bloomberg
