Dollar Weakens on Yellen Rate Pledge Before Economy Measures
New York (June 23) The dollar extended its streak of declines to the longest since April before reports this week forecast to show orders for durable goods declined and a smaller gain in new home sales in the world’s largest economy.
The U.S. currency fell for the first time in three days versus the yen after Federal Reserve Chair Janet Yellen last week said the central bank remains committed to low interest rates for a “considerable time.” Australia’s dollar jumped while New Zealand’s currency reached a six-week high after a report showed manufacturing in China improved more in June than analysts expected.
“It’s a combination of the still very dovish Fed and yet still pretty decent underlying economic data,” said Peter Kinsella, a senior currency strategist at Commerzbank AG in London. “It’s the classic Goldilocks scenario. The data’s coming in, it’s not too hot, it’s not too cold, and people sell the dollar and trade it with a benign neglect.”
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 of its major counterparts, declined 0.1 percent to 1,009.15 at 9:46 a.m. New York time. The gauge fell for a fourth day, the longest streak of losses since the period ending April 30.
The dollar weakened 0.2 percent to 101.87 yen. The U.S. currency was little changed at $1.3590 per euro. The shared currency depreciated 0.3 percent to 138.44 yen.
Yield Update
Yields on 10-year Treasuries rose for a third week last week. Yields fell one basis point, or 0.01 percentage point, to 2.60 percent today.
“Despite the fact that U.S. yields are pushing higher, the dollar isn’t really gaining much traction,” said Michael Sneyd, a London-based currency strategist at BNP Paribas SA, by phone from New York.
A Deutsche Bank AG measure of volatility was at 5.34 percent after dropping to 5.28 percent on June 19, the lowest close since August 2001. One-month implied volatility in dollar-yen was at 4.9 percent after touching 4.875 percent earlier. That matched the June 19 close which was the lowest since Bloomberg started compiling the data in December 1995.
Most emerging-market currencies advanced after HSBC Holdings Plc and Markit Economics said today its preliminary Chinese manufacturing purchasing managers’ index rose to 50.8 this month, compared with analyst estimates for an increase to 49.7 from 49.4 in May.
Ruble, Rand
Russia’s ruble added 0.6 percent, while the South African rand gained for a second day, rising 0.4 percent to 10.6134.
Australia’s dollar added 0.4 percent to 94.28 U.S. cents and reached 94.45 cents, the strongest since April 10. New Zealand’s currency climbed 0.3 percent to 87.22 U.S. cents after reaching 87.49, a level unseen since May 6. China is Australia and New Zealand’s biggest trading partner.
Today’s data on China “eased concerns about falling commodity demand, helping to boost currencies such as the Aussie,” said Nagayuki Yamagishi, a senior analyst in Tokyo at Money Square Japan Inc., a foreign-exchange broker. “As volatility remains low among the major currencies, higher-yielding currencies like the Aussie and kiwi tend to be bid.”
Japan’s government is considering bringing forward cabinet approval of its growth strategy and basic economic plan to tomorrow from June 27, Kyodo News reported on June 19, citing a government source.
Source: Bloomberg
