US dollar drops amid speculation advance too fast; yen climbs
The US currency slipped 0.1% to $1.2632 per euro; the yen appreciated 0.2% to 108.67 per dollar
London/Tokyo: The dollar fell the most in two weeks on speculation the currency strengthened too rapidly in September and before jobs data on Thursday that may highlight the uneven nature of the US recovery.
The yen climbed for a second day as Japan’s vice finance minister Nobuhide Minorikawa said weakness in the currency is hurting some companies by driving up imported energy prices. The New Zealand and Australian dollars jumped as policy makers eased property restrictions in China, the South Pacific nations’ biggest trading partner. The euro rose from near a two-year low as European Central Bank (ECB) president Mario Draghi prepared to clarify the scope of his asset-purchase plan.
“It’s difficult to see how much of this is a dollar move and how much is the market beginning to question what the ECB can do," said Jane Foley, senior foreign-exchange strategist at Rabobank International in London. “It may be time to take a little bit of profit. There is a lot of talk Draghi could disappoint today."
The Bloomberg Dollar Spot Index declined 0.2% to 1,068.89 at 11.19am London time on Thursday. That’s the biggest drop since 16 September.
The US currency slipped 0.1% to $1.2632 per euro, after touching $1.2571 on 30 September, the strongest level since September 2012. The yen appreciated 0.2% to 108.67 per dollar, having reached 110.09 on Wednesday, the weakest since 25 August 2008. It gained 0.2% to 137.26 per euro.
Currency swings
Implied volatility on one-month options for dollar-yen rose to 8.705% from 8.565% on Wednesday, poised for its highest close since March. The measure is used to set option prices and gauge the expected pace of currency swings. The average this year is 6.962%.
US data on Thursday will show the number of applications for unemployment benefits rose in the week ended 27 September and factory orders tumbled, according to Bloomberg surveys of economists.
“The dollar is consolidating after reaching 110 yen, and other currencies which were a bit oversold against the dollar are being bought back," said Marito Ueda, senior managing director at currency-margin company FX Prime Corp. in Tokyo. “Investors are adjusting their positions ahead of the ECB meeting as the dollar’s recent rise has been quite rapid."
Worst performers
The dollar climbed 3.6% in the past month, the biggest gain among 10 developed-nation currencies tracked by Bloomberg Correlation Weighted Indexes. The Australian dollar weakened 2.6%. Japan’s currency fell 0.2%.
The Aussie rallied on Thursday after trading at an eight-month low on Wednesday, and the kiwi climbed more than 1% after Chinese policy makers eased property restrictions. The move by the People’s Bank of China on 30 September marked a reversal in a four-year tightening campaign, as slowing property investment and industrial production raise risks that economic growth will drift too far below the government’s target.
The Aussie also climbed after the statistics bureau said approvals to build or renovate homes and apartments increased 3% in August from the previous month, compared with the median forecast of analysts for a 1% gain. The nation’s trade deficit narrowed to A$787 million from a A$1.08 billion shortfall in July, the bureau said.
“Reports from China on some policy easing plus the data today on housing approvals have given the Aussie some support," said Greg Gibbs, the head of Asia-Pacific markets strategy at Royal Bank of Scotland Group Plc in Singapore. “This is just the market reassessing where the Aussie should trade after a very sharp move lower over the past month."
The kiwi added 1.1% to 78.70 US cents and the Australian currency climbed 0.4% to 87.71 US cents.
Draghi pledge
The euro has tumbled almost 10% versus the dollar from a two-and-a-half-year high reached in May as the ECB unveiled unprecedented stimulus.
While Draghi pledged to start a program this month to buy asset-backed securities and covered bonds, initial buying in those markets will probably be modest, according to two euro-zone central bank officials who asked not to be identified because the matter is private.
Policy makers will also keep the benchmark interest rate unchanged on Thursday, according to all analysts surveyed by Bloomberg News, after unexpectedly lowering borrowing costs to records on 4 September. Bloomberg
With assistance from Mika Otsuka in New York, Kazumi Miura in Tokyo and Candice Zachariahs in Sydney.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!