Yen Advances as Credit Losses Damp Demand for Higher Yields

Yen Advances as Credit Losses Damp Demand for Higher Yields

Aug. 19 (Bloomberg) -- The yen increased to a three-month high against the euro on speculation financial firms will report more losses, reducing demand for higher-yielding assets funded by loans in Japan.

Japan's currency also advanced versus the dollar and the Australian dollar on concern Lehman Brothers Holdings Inc., the largest underwriter of mortgage bonds before the subprime market collapsed, may post $4 billion in credit writedowns. The dollar traded near a six-month high against the euro as U.S. wholesale prices increased in July twice the amount forecast.

``The downbeat assessment from big names in the investment community is weighing on the market,'' said Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New York. ``Risk aversion is coming back.''

The yen climbed 0.3 percent to 161.28 per euro at 10:32 a.m. in New York, from 161.82 yesterday, after touching 160.87, the strongest level since May 13. The yen advanced 0.3 percent to 109.78 per dollar, from 110.13. The dollar traded at $1.4692 per euro, compared with $1.4694, after reaching $1.4631, the strongest level since Feb. 20.

Japan's currency rose 0.5 percent to 95.16 per Australian dollar and advanced 0.5 percent to 204.45 versus the pound as concern that Lehman writedowns may deepen discouraged the carry trade, in which investors get funds in a country with low borrowing costs and invest where returns are higher. The Bank of Japan held its target lending rate at 0.5 percent today, the lowest among industrialized countries. That benchmark compares with 5 percent in the U.K. and 7.25 percent in Australia.

Outlook for Lehman

JPMorgan Chase & Co. predicted Lehman may lose $3.30 a share in the third quarter, more than three times the average analyst estimate in a Bloomberg survey. Financial institutions have posted more than $500 billion of losses and writedowns since the start of last year, according to data compiled by Bloomberg.

The Standard & Poor's 500 Index dropped 0.9 percent, while Europe's Dow Jones Stoxx 600 slid 2.1 percent. The MSCI Asia- Pacific Index of regional shares lost 2.1 percent.

Banks are being ``crushed by ballooning debts,'' said Tetsuhisa Hayashi, chief manager of foreign-exchange trading at Bank of Tokyo-Mitsubishi UFJ Ltd. in Tokyo, a unit of Japan's largest lender by market value. ``Risk aversion among investors will cause further yen buying,'' driving the Japanese currency to 100 per dollar by year-end, Hayashi said.

Producer Prices

The dollar briefly strengthened versus the euro after the U.S. Labor Department reported that producer prices climbed 1.2 percent in July after increasing 1.8 percent the previous month. The median forecast of 77 economists surveyed by Bloomberg News was for an increase of 0.6 percent.

``The market is seizing on any data that suggest interest rates need to go higher,'' said Stephen Malyon, co-head of currency strategy at Scotia Capital Inc. in Toronto. ``Our view is that inflation won't be a major problem in the medium term. Once the market gets a chance to reflect on that, it should be less dollar-bullish.''

Futures on the Chicago Board of Trade show a 16 percent chance the U.S. central bank will raise the 2 percent target rate for overnight lending between banks by at least a quarter- percentage point by its Dec. 16 meeting, down from 37 percent odds a week earlier. Policy makers next meet Sept. 16.

Dallas Fed President Richard Fisher said in a speech in Aspen, Colorado, that the U.S. economy may face a persistent rise in inflation as higher food and energy prices prompt companies to pass on cost increases.

Fisher's Dissent

Fisher's comments reflect his decision at the Aug. 5 meeting of the Federal Open Market Committee to dissent for a fifth time this year, preferring an increase in the benchmark interest rate. Central bank policy makers signaled two weeks ago a pause in any change in borrowing costs, noting falling employment and persistent financial market turmoil.

Crude oil for September delivery fell 0.2 percent to $112.65 a barrel on the New York Mercantile Exchange.

The Bank of Japan cut its economic assessment for a second straight month, acknowledging that threats to growth outweigh decade-high inflation as its chief concern. The world's second- largest economy shrank last quarter, putting it on the brink of the first recession in six years.

The revised BOJ outlook ``will place even less pressure on the yen to appreciate in the middle to long term,'' wrote Masafumi Yamamoto, head of foreign-exchange strategy for Japan at Royal Bank of Scotland Group Plc in Tokyo and a former BOJ currency trader, in a research note today.

RBS pushed back its forecast for a BOJ rate increase to the fourth quarter of 2009 from the second quarter, Yamamoto said, confirming the contents of the report.

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Euro Trades Near 5 1/2-Month Low Versus Dollar as GDP Shrinks

Aug. 14 (Bloomberg) -- The euro traded near a 5 1/2-month low against the dollar after a report showed Europe's economy contracted for the first time since the 15-nation currency was introduced almost a decade ago.

Europe's currency has traded in a range of about $1.48 to $1.51 this week after dropping 3.6 percent last week, the biggest weekly decline since January 2007. The 14-day relative strength of the euro versus the dollar indicated the greenback's gains may have been too fast to be sustained.

``The bulk of the swift downward move in the euro-dollar is behind us,'' said Todd Elmer, currency strategist at Citigroup Global Markets in New York.

The euro fell 0.2 percent to $1.4885 at 10:17 a.m. in New York, from $1.4919 yesterday. It depreciated to $1.4816 two days ago, the weakest level since Feb. 26. The euro was at 163 yen, compared with 163.43 yesterday, when it reached a three-month low of 161.40. The dollar traded at 109.52 yen, compared with 109.53.

The euro's 14-day relative strength index against the dollar was at 20.8 today. A reading below 30 typically signals a change in price direction is imminent.

The pound was little changed at $1.8717 after touching $1.8619, the lowest level in 22 months against the dollar. The Bank of England cut its economic-growth forecast yesterday, signaling it may reduce interest rates.

Pound Versus Yen

Sterling may extend its decline to 192.48 yen after the currency dropped below so-called support of 211.25 yen, said New York-based Citigroup analyst Tom Fitzpatrick and London colleague Shyam Devani, who use charts to predict currency movements, in a research note yesterday. The pound was little changed at 204.91 yen today. A support level is where buy orders are concentrated.

Traders have reduced bets the European Central Bank will raise interest rates a second time this year. The implied yield on the December Euribor futures contract was at 4.95 percent today, compared with 5.04 percent at the end of July.

Europe's gross domestic product shrank 0.2 percent in the second quarter, after growing 0.7 percent in the first three months of the year, the European Union's statistics office said today in Luxembourg. The German economy, Europe's largest, contracted for the first time in almost four years, the Federal Statistics Office said in Wiesbaden.

``We expect the euro zone to move into an outright recession,'' said Ian Stannard, a London-based currency strategist at BNP Paribas SA. ``We see a multi-year euro downtrend now developing. And data we are getting is consistent with that view.''

U.S. Jobless Claims

More Americans than forecast filed initial claims for jobless benefits last week, signaling further weakness in the labor market. The number of first-time applications decreased to 450,000 in the week ended Aug. 9, from a revised 460,000 the prior week that was higher than previously estimated. The median forecast of 41 economists surveyed by Bloomberg News was for a drop to 435,000 from a previously reported 455,000.

Bank repossessions in the U.S. almost tripled in July, and foreclosure filings increased 55 percent from a year earlier as falling prices cut homeowner equity, said RealtyTrac Inc., a seller of foreclosure data.

The yen may rise against the dollar on speculation Japanese investors will repatriate some of their earnings on investments in U.S. Treasuries, traders said. The U.S. will pay $38.8 billion in principal and coupons on government debt tomorrow. Japan is the largest foreign owner of Treasuries, according to U.S. government data.

Japanese Bondholders

Japanese investors sold 461.3 billion yen ($4.2 billion) more overseas bonds and notes than they bought last week, the second week of sales and the most since the period ended April 18, the Finance Ministry said today in Tokyo.

``There's a great chance that the yen will appreciate,'' said Akira Takei, general manager in Tokyo for international bonds at Mizuho Asset Management Co., which oversees the equivalent of $37.3 billion. ``People want to avoid risks. Repatriation will play some part in yen strength as there is some comfort in holding funds in your own currency.''

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Dollar Snaps Five-Day Rally Versus Euro on Bets Gains Excessive

Aug. 12 (Bloomberg) -- The dollar snapped a five-day winning streak against the euro on speculation the currency's recent gains are too fast to be sustained.

The greenback has rallied 4.3 percent versus the euro this month on speculation the U.S. economic slowdown is spreading to Europe and as commodity prices have tumbled. The ruble rose the most in seven years against the dollar as Russia called off military operations in Georgia.

``The dollar's rally was overextended,'' said Steve Butler, director of foreign-exchange trading at Scotia Capital Inc. in Toronto. ``It has been such a one-way street.''

Against the euro, the dollar traded at $1.4910 at 11 a.m. in New York, compared with $1.4909 yesterday. It touched $1.4816, the strongest since Feb. 26. The dollar decreased 0.3 percent to 109.75 yen, from 110.06 yesterday, when it touched the seven-month high of 110.40. The euro fell 0.2 percent to 163.77 yen after touching 163.26, the lowest since June 5.

The euro has dropped 7 percent against the dollar since reaching the all-time high of $1.6038 on July 15. The 14-day relative strength index of the euro against the dollar was 22.40 today. A reading below 30 suggests a change in price direction is imminent.

The ruble was one of the biggest gainers versus the dollar after President Dmitry Medvedev ordered a halt to its offensive in Georgia, saying the military had achieved its goal. Russia's currency rose as much as 1.2 percent to 24.1447 per dollar, its biggest jump since Jan. 4, 2001. Against the euro, the ruble rose as much 1.4 percent, the steepest gain since 2005.

The currency dropped 2.3 percent against the dollar on Aug. 8 after Russian Prime Minister Vladimir Putin said war with Georgia had started.

Dollar Index

The Dollar Index, which gauges the greenback against the currencies of six major U.S. trading partners, was little changed at 76.135. It touched 76.616, the highest level since Feb. 12. The index rose 1.7 percent on Aug. 8, the biggest jump in six years.

``It's just time for a bit of correction,'' said MatthewKassel

, director of proprietary trading at ING Financial Markets LLC in New York. ``The dollar's rally is exhausted.''

The dollar surged 2.1 percent against the euro on Aug. 8, the biggest one-day gain since January 2001.

The yield on three-month Euribor contract for June decreased 0.05 percentage point to 4.48 percent today, indicating investors bet the European Central Bank may lower its main refinancing rate from a seven-year high of 4.25 percent by the second quarter of 2009.

Germany's Economy

Germany's economy, the largest in the 15-nation region that uses the euro, probably contracted in the second quarter for the first time in almost four years, according to the median forecast of 41 economists surveyed by Bloomberg News. The government is due to report the data on Aug. 14.

In Japan, a report tomorrow may show gross domestic product shrank at an annual rate of 2.3 percent in the three months ended June 30, following 4 percent growth in the previous quarter, according to a separate Bloomberg News survey.

``The market has become less bearish about the U.S. and, comparatively speaking, much more bearish about what's going on in the rest of the world,'' said Mike Moran, a senior currency strategist at Standard Chartered Bank in New York, in an interview on Bloomberg Television.

forex news

Euro Little Changed as ECB Official Cites Risk of Inflation

Aug. 11 (Bloomberg) -- The euro was little changed against the dollar after a European Central Bank policy maker said the bank remains focused on inflation and traders judged last week's 3.6 percent drop to be excessive.

ECB council member Klaus Liebscher said policy makers remain focused on the ``worrying'' level of inflation, Market News reported today, citing an interview. The Russian ruble declined to the lowest level against the dollar since February as armed clashes between Russia and Georgia in South Ossetia and Abkhazia deterred investors from holding the currency.

``Inflation remains a threat, and the ECB will keep reminding the market of that,'' said Adam Cole, the head of global currency strategy in London at RBC Capital Markets.

The euro traded at $1.4990 at 10:19 a.m. in New York, compared with $1.5005 on Aug. 8. It touched $1.4907, the lowest level since Feb. 26. The 15-nation euro dropped 0.3 percent to 164.87 yen, from 165.38 at the end of last week. It reached 163.65 yen, the weakest level since June 5. The dollar declined 0.2 percent to 109.98 yen, from 110.18.

The 14-day relative strength index of the euro versus the dollar fell to 21.82, the lowest since the European currency's 1999 debut. A relative strength index level below 30 suggests a currency's decline is extreme and a reversal may be imminent.

Russia's ruble fell as much as 1.6 percent to 24.618 per dollar, the weakest since Feb. 20, after Russia stepped up its bombing of Georgia, rejecting a proposed cease-fire agreed upon by Georgian President Mikheil Saakashvili. Against the euro, it declined 0.5 percent to 36.537.

Swiss Franc

The Swiss franc rose against most of the major currencies as concern the conflict will escalate prompted investors to seek a haven. The franc rose 0.3 percent to 1.6192 against the euro and advanced 0.3 percent to 1.0794 versus the dollar.

Liebscher said the ECB was right to raise interest rates in July and price risks haven't waned in recent weeks and months, although the decline in oil prices is a ``relief'' and ``welcome,'' Market News reported. The extent of the weakening in economic data ``is only a limited surprise,'' he was quoted as saying.

``There is of course no bias for the future, and there is no pre-commitment, but what really has to be done in the future depends on the data available,'' said Liebscher, according to Market News. ``For us it's not either-or, growth or price stability. It is price stability. We have to do at a given moment of time what is necessary.''

ECB Rate Outlook

Traders raised bets that the ECB will lift rates this year after leaving the main refinancing rate at 4.25 percent last week. The implied yield on December interest-rate futures, an indicator of interest rate expectations, increased 2 basis points, or 0.02 percentage point, from Aug. 8, to 4.95 percent.

The European single currency sank the most in almost eight years against the dollar on Aug. 8 as traders pared bets the ECB will raise interest rates as the economy slows. The weekly decline was the most since January 2005.

A government report showed French industrial production dropped 0.4 percent in June, the National Statistics Office in Paris. Economists in a Bloomberg survey had predicted an increase of 0.6 percent.

Moody's Investors Service said defaults on loans included in European commercial mortgage-backed securities rose 80 percent in the second quarter, sparking concern the financial turmoil in the region is deepening.

`Weaker Growth'

``We clearly have weaker growth outside the U.S.,'' said Benedikt Germanier, a currency strategist at UBS AG in Stamford, Connecticut, in an interview on Bloomberg Television. ``With the rest of the world's growth momentum declining, clearly that's enough for the dollar to sustainably gain ground in relative terms.''

Negative economic news in the U.S. may not be over, according to Sophia Drossos, a strategist in New York at Morgan Stanley.

``I would not chase the dollar's strength versus the euro as the pair has moved beyond interest-rate support,'' said Drossos. ``The dollar is not out of the woods. It will take the market a while to come around to our point of view.''

Sales at U.S. retailers fell 0.1 percent in July after rising 0.1 percent in the previous month, according to the median estimate in a Bloomberg News survey. The Commerce Department will release the data on Aug. 13.

China's yuan weakened as much as 0.1 percent to 6.8663 per dollar, a six-week low. The yuan's 18 percent appreciation against the dollar over the past three years is grinding to a halt as government officials said supporting growth is as important as fighting inflation.

The People's Bank of China has kept the yuan little changed since June, after gains of 4.1 percent in the first quarter and 2.3 percent in the second. That raised speculation that currency policy will be adjusted to bolster exports as the trade surplus shrinks. Legg Mason Inc.'s Western Asset Management Co. is trimming bets on the yuan after it rose in July by the smallest amount in a year.

Euro Falls the Most in 8 Years on Reduced Bets for Higher Rate

Euro Falls the Most in 8 Years on Reduced Bets for Higher Rate

Aug. 8 (Bloomberg) -- The euro fell the most in almost eight years against the dollar as traders pared bets the European Central Bank will raise interest rates as the economy slows.

The euro is poised for its biggest weekly loss since January 2005 after ECB President Jean-Claude Trichet yesterday said economic growth will be ``particularly weak'' through the third quarter. An index that tracks the dollar against the currencies of six U.S. trading partners touched the highest since February. Crude oil fell to a three-month low.

``This is the beginning of a new chapter for the dollar as Trichet and other central banks are paying more attention to the downside risk to growth,'' said Dustin Reid, a senior currency strategist at ABN Amro Bank NV in Chicago. ``The decline of oil prices is a significant driver behind this dollar rally because it enables other central banks to turn their eyes away from inflation and focus on growth.''

The euro declined 1.95 percent to $1.5032 at 10:23 a.m. in New York and reached $1.5005, the lowest level since Feb. 27, from $1.5325 yesterday. It dropped as much as 2.08 percent, the biggest one-day drop since Sept. 6, 2000. Against the yen, the European currency traded at 165.84, from 167.70. The dollar rose 0.5 percent to 109.97 yen after touching 110.08, the strongest since Jan. 10.

Moving Average

The euro's decline below $1.53 and the break of the 200-day moving average at $1.5226 ``marks a significant change in sentiment for the dollar,'' pointing to a further decline to $1.46, Kevin Edgeley, a London-based technical analyst at Goldman Sachs Group Inc., wrote in a report today.

The euro has declined 3.1 percent against the dollar in its fourth weekly decline, the worst losing streak since May 2007. Against the yen, the U.S. currency has advanced 2.1 percent, heading for its biggest weekly gain in almost two months.

``The most important aspect of the dramatic collapse in the euro dollar is the absence of confirmation from other markets,'' said David Woo, global head of currency strategy at Barclays Capital Inc. in London. ``None of the typical drivers of the euro-dollar in the past couple of years could have accounted for the magnitude of this move, which leads one to conclude that this is a technical driven move.''

The South African rand led losses among the most-traded currencies as the prices of gold and platinum dropped, reducing prospects for export earnings from the country's biggest exports. The greenback rose to a six-month high against the Australian dollar, and advanced to the highest since September against the New Zealand dollar on speculation the central banks will cut borrowing costs.

Russia's Ruble

The Russian ruble fell by the most in 2 1/2 years against a dollar-euro basket used by the government after Georgia's Interior Ministry said four Russian fighter-jets entered Georgian airspace and bombed the towns of Gori and Kareli, boosting the risk of war. The ruble dropped as much as 0.8 percent against the basket.

The pound fell below $1.93 for the first time since March 2007 as the Bank of England kept its main interest rate steady at 5 percent yesterday after inflation accelerated and the economy teetered on the brink of a recession. It has dropped 2.7 percent this week to $1.9210, its biggest weekly drop in three years.

The Dollar Index on the ICE futures exchange reached 75.713 today, the highest since Feb. 21.

`No Bias'

Trichet said yesterday he has ``no bias'' or ``pre- commitment'' toward future rate movements after the central bank left the main refinancing rate at 4.25 percent. He told reporters in Frankfurt that while inflation remains a threat, risks to economic growth are ``materializing.''

European retail sales dropped by the most in at least 13 years in June, the European Union said on Aug. 5. Consumer confidence slid in July by the most since the Sept. 11, 2001, terrorist attacks, the European Commission said July 30.

Traders pared bets the ECB will lift rates a second time this year after increasing its main rate by a quarter-point last month. The implied yield on the December interest rate futures, an indication of expectations, retreated 2 basis pointsto 4.94 percent today.

The New Zealand dollar slumped as much as 2.2 percent to 69.84 U.S. cents, the biggest loss in two months. Australia's dollar dropped 1.7 percent, falling for a fourth day, to 89.10 U.S. cents, from 90.66 cents yesterday. The Reserve Bank of Australia said it may lower borrowing costs, after keeping its benchmark interest rate at a 12-year high of 7.25 percent this week.

Oil, Metals, Crops

Crude oil, metal and crop prices fell as the dollar climbed, reducing the appeal of commodities as a currency hedge. Oil has declined to $118.15 a barrel since touching the record of 147.27 on July 11.

The euro-dollar exchange rate and oil have had a correlation of 0.9 in the past year, according to Bloomberg calculations. A reading of 1 would mean they moved in lockstep.

``Oil prices have turned out to be much more supportive of the dollar than I expected,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. ``It does temporarily relieve some concern that the U.S. economy will weaken further. This is a plus for sentiment.''

Dollar Falls as GDP Trails Forecast, Jobless Claims Increase

Dollar Falls as GDP Trails Forecast, Jobless Claims Increase

July 31 (Bloomberg) -- The dollar fell for the first time in three days against the euro as reports showed the U.S. economy grew less than forecast in the second quarter and initial jobless claims rose last week to a five-year high.

The euro advanced earlier against the dollar as European inflation accelerated to the fastest pace in 16 years. The pound dropped against the euro after reports showed British consumer confidence declined this month to a record low and house prices fell the most in almost two decades.

``The economic backdrop is far less robust than people thought,'' said Tom Fitzpatrick, global head of currency strategy at Citigroup Global Markets Inc. in New York. ``Today's numbers provide a platform to send the euro-dollar to new highs.''

The dollar dropped 0.4 percent to $1.5641 per euro at 10:33 a.m. in New York, from $1.5576 yesterday. The U.S. currency declined to the record low of $1.6038 on July 15. The euro increased 0.2 percent to 168.71 yen, from 168.41. The U.S. currency dropped 0.3 percent to 107.85 yen, from 108.13.

Today's decline pared the greenback's gain versus the euro this month to 0.8 percent. The dollar has advanced 1.6 percent against the yen, while the euro has gained 0.9 percent versus Japan's currency.

Sterling declined 0.2 pence to 78.73 pence per euro today after the London-based market-research firm GfK NOP said its index of consumer confidence fell to the lowest since the data began in 1974. The average value of a home dropped 8.1 percent from a year earlier, the biggest decline since at least 1991, said Nationwide Building Society, Britain's fourth-biggest mortgage lender.

Fed Rate Outlook

Futures contracts on the Chicago Board of Trade showed a 32 percent chance of the Fed raising its 2 percent target rate for overnight loans between banks by at least a quarter-percentage point by Sept. 16, down from 38 percent odds yesterday. Most traders expect policy makers to keep borrowing costs unchanged when they next meet Aug. 5.

U.S. gross domestic product increased at an annual rate of 1.9 percent in the second quarter after revised 0.9 percent growth in the first three months of the year, the Commerce Department reported today. The median forecast of 79 economists surveyed by Bloomberg News was for an advance of 2.3 percent.

Initial jobless claims rose to 448,000 in the week ended July 26, from a revised 404,000 the prior week, the Labor Department said. Economists in a Bloomberg survey had forecast a drop in claims. The total number of initial filings last week was the highest since April 2003.

Company Hiring

The U.S. currency touched a one-month high against the euro yesterday after a private report showed companies unexpectedly added jobs this month.

``The dollar's rally was built on a shaky foundation,'' said Stephen Malyon, co-head of currency strategy at Scotia Capital Inc. in Toronto. ``Today's numbers just highlighted there's more downside risk to growth. The jump in jobless claims puts a brake on the dollar's rally.''

Non-farm payrolls dropped by 75,000 this month following a decline of 62,000 in June, according to the median forecast 0f 79 economists surveyed by Bloomberg News. The Labor Department's report, which includes government hiring, is due tomorrow.

The euro strengthened versus the dollar as the European Union statistics office reported that the euro zone's inflation rate rose to 4.1 percent this month, the biggest increase since April 1992. The European Central Bank raised its main refinancing rate to 4.25 percent on July 3, the highest level since 2001.

European Inflation

``We're going to see inflation moving further to the upside,'' said Jeremy Stretch, a senior strategist in London at Rabobank International, the third-largest Dutch bank. ``That might just lead the market to think that even with the downturn in economic data, the ECB might turn toward tighter monetary policy. That's providing a little support for the euro.''

South Africa's rand rose as much as 0.9 percent to 7.3291 versus the dollar, the strongest since Feb. 4, after a report showed the country's trade deficit unexpectedly narrowed in June. The rand has increased 6.2 percent this month for the best performance among the world's major currencies.

Turkey's lira advanced to a six-month high after the Constitutional Court rejected yesterday a call by prosecutors to ban the party of Prime Minister Recep Tayyip Erdogan, which is seeking to introduce Islamic law in secular Turkey. The lira climbed as much as 2.4 percent to 1.1555 per dollar, its strongest since Jan. 15. It has gained 5.4 percent versus the dollar this month.

Fundamental Outlook at 1400 GMT (EDT + 0400)

Fundamental Outlook at 1400 GMT (EDT + 0400)

€

The euro extended yesterday’s losses vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.5520 level and was capped around the $1.5615 level. The common currency reached its lowest level since 24 June as traders continued to price in the likelihood of a further slowdown in the eurozone economy. Traders also increased their exposure to the U.S. dollar after ADP private sector jobs unexpectedly increased 9,000 in July, defying expectations of a sizable decline. Some economists are upwardly revising their forecasts for the July non-farm payrolls report that will be released on Friday. In other U.S. news, the Federal Reserve announced actions to enhance its existing liquidity facilities including an extension of the Fed’s Primary Dealer Credit Facility and Term Securities Lending Facility through 30 January 2009. The Fed noted there remains “continued fragile circumstances in financial markets” and the Fed will also launch an 84-day Term Auction Facility from 11 August, complementing the 28-day facility it already offers. The European Central Bank and Swiss National Bank reported they are planning to extend the maturity of their liquidity operations, essentially availing U.S. dollars to European banks over a longer period of time. In eurozone news, EMU-15 July economic sentiment fell to 89.5, its worst level in more than five years. Some traders believe the ECB will reduce its assessment on economic growth at next week’s Governing Council meeting. Banco de Espana reported the eurozone faces higher upside inflation risks. Other data saw German June new machinery, plant orders off 5.0% y/y while EMU-15 retail PMI improved to 46. Euro bids are cited around the $1.5585/ 1.5230 level.

¥/ CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥108.35 level and was supported around the ¥107.70 level. The pair reached its highest level since 25 June as traders continued to speculate the Japanese economy will weaken further. Most traders believe Bank of Japan’s Policy Board will keep the overnight call rate unchanged at 0.50% for the foreseeable future. Data released in Japan overnight saw June industrial output fall 2.0% m/m, worse-than-expected, and was up 0.2% y/y. Traders are waiting for this week’s likely cabinet shuffle by Prime Minister Fukuda to see if decision-makers at the finance and economy ministries are replaced. The Nikkei 225 stock index gained 1.58% to close at ¥13,367.79. Dollar bids are cited around the ¥106.40 level. The euro came off vis-à-vis the yen as the single currency tested bids around the ¥167.95 level and was capped around the ¥168.60 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥214.35 level while the Swiss franc came off vis-à-vis the yen and tested bids around the ¥102.85 level. The Chinese yuan depreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8272 in the over-the-counter market, up from CNY 6.8264.

₤

The British pound moved higher vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.9845 level and was supported around the $1.9745 level. Technically, today’s intraday low was just below the 23.6% retracement of the move from $2.1160 to $1.9335. Traders are awaiting details of a possible government-sponsored program to swap mortgage assets for gilts. Cable bids are cited around the $1.9360 level. The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.7850 level and was capped around the ₤0.7875 level.

CHF

The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0520 level and was supported around the CHF 1.0440 level. The pair traded at its highest level since 13 June. Data released in Switzerland today saw the KOF leading economic barometer fall to 0.9 in July from a revised 0.99 in June, its lowest level in give years. U.S. dollar offers are cited around the CHF 1.0515/ 1.0625 levels. The euro and British pound gained ground vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.6335 and CHF 2.0785 levels, respectively.

Technical Outlook at 1230 GMT (EDT + 0400)

(Bid Price) (Today’s Intraday Range)

EUR/ USD 1.5541 1.5615, 1.5521
USD/ JPY 108.25 108.33, 107.68
GBP/ USD 1.9770 1.9843, 1.9745
USD/ CHF 1.0505 1.0520, 1.0439
AUD/ USD 0.9423 0.9527, 0.9410
USD/CAD 1.0258 1.0268, 1.0218
NZD/USD 0.7325 0.7400, 0.7314
EUR/ JPY 168.25 168.61, 167.94
EUR/ GBP 0.7861 0.7878, 0.7857
EUR/ CHF 1.6328 1.6333, 1.6285
GBP/ JPY 214.00 214.18, 213.24
CHF/ JPY 103.00 103.40, 102.87

Dollar Advances to One-Month High as U.S. Companies Add Jobs

Dollar Advances to One-Month High as U.S. Companies Add Jobs

July 30 (Bloomberg) -- The dollar rose to a one-month high versus the euro and the yen after a private report showed U.S. companies unexpectedly added jobs this month.

The greenback also gained as a decline in crude oil eased concern elevated fuel costs will erode consumer spending. New Zealand's dollar dropped against all of the other major currencies except the Australian dollar after Reserve Bank Governor Alan Bollard said slowing economic growth will curb inflation in the next two years.

``It's premature to say employment destruction has hit bottom, but today is a good sign,'' said Mike Moran, a senior currency strategist at Standard Chartered in New York. ``In conjunction with a pullback in oil prices recently, it certainly contributed to the dollar's recovery.''

The dollar increased 0.4 percent to $1.5524 per euro at 9:49 a.m. in New York, from $1.5588 yesterday. It touched $1.5522, the strongest level since June 24. It may advance to $1.5460, Moran said. The U.S. currency rose 0.2 percent to 108.30 yen, from 108.11. It touched 108.33, the highest since June 25. The euro fell 0.2 percent to 168.14 yen, from 168.53.

The Australian dollar declined 1 percent to 94.32 U.S. cents after a government report showed home-building approvals unexpectedly dropped in June for a second month. The Aussie decreased 0.9 percent to 102.08 yen.

Weaker Kiwi

New Zealand's dollar fell to a 10-month low against its U.S. counterpart after Bollard said in a speech in Auckland that ``weakness in the economy will be sufficient to bring inflation and inflation expectations down over the medium term.'' The kiwi dropped 1.1 percent to 73.23 U.S. cents after touching 73.16, the lowest level since Sept. 25.

The U.S. dollar strengthened versus the euro as ADP Employer Services reported that companies added 9,000 jobs in July after cutting a revised 77,000 positions in the previous month. The median forecast of 29 economists surveyed by Bloomberg News was for a reduction of 60,000 jobs.

Non-farm payrolls dropped by 75,000 this month following a decline of 62,000 in June, according to the median forecast in a separate Bloomberg survey. The Labor Department is scheduled to release its report Aug. 1.

Crude oil fell for a second day, declining as much as 0.8 percent to $121.25 a barrel on the New York Mercantile Exchange. It has dropped 17 percent from the record of $147.27 set on July 11. The euro-dollar exchange rate and oil have had a correlation of 0.9 in the past year, according to Bloomberg calculations based on the correlation of their value changes. A reading of 1 would mean they moved in lockstep.

`Starts to Align'

``Everything starts to align for the dollar,'' said Brian Dolan, chief currency strategist at FOREX.com, a unit of online currency trading firm Gain Capital in Bedminster, New Jersey. ``There's optimism that we're starting to see some stabilization in the U.S. economy. A slowing global economy will likely reduce global demand for commodities. It's another positive for the dollar.''

The Dollar Index, which tracks the greenback against the currencies of six U.S. trading partners, reached 73.493, the highest level since June 24.

The U.S. currency may rise further versus the yen as Japanese investors invest their summer bonuses in overseas assets offering higher yields, according to Daisaku Ueno, a senior economist and currency analyst in Tokyo at Nomura Securities Co., Japan's largest brokerage.

`Individual Money'

``Emerging markets are constantly attracting Japanese individual money,'' said Ueno. Japan's currency may weaken to 110 per dollar by year-end, he said.

Employees at private companies were paid summer bonuses in June and July totaling 14.8 trillion yen, according to Kazuyoshi Nakata, an economist in Tokyo at Mitsubishi UFJ Research & Consulting Co., a unit of Japan's largest publicly traded lender.

HSBC Investments will seek to raise 50 billion yen for a fund focused on Brazil's stocks tomorrow, while Nomura Asset Management will seek 60 billion yen for global stocks Aug. 1. Brazil's Bovespa Index, measured in yen, advanced 16 percent over the past 12 months, according to Bloomberg calculations. Japan's Nikkei 225 Stock Average fell 23 percent.

The Bank of Japan's target lending rate of 0.5 percent is the lowest among industrialized economies, making overseas assets more attractive to domestic investors.

Implied volatility on one-month dollar-yen options fell to 10.06 percent, from 10.73 percent a week earlier. Lower volatility may encourage carry trades, in which investors borrow in countries with low interest rates and buy assets where returns are higher.

Dollar Rises to One-Month High as Confidence Rises, Oil Falls

Dollar Rises to One-Month High as Confidence Rises, Oil Falls

July 29 (Bloomberg) -- The dollar advanced to a one-month high versus the euro and the yen as U.S. consumer confidence increased and crude oil prices dropped, reducing concern the economy may fall into a recession.

The currency rose against the yen and New Zealand's dollar as unemployment climbed in Japan last month and home building permits fell to the lowest in almost 22 years in New Zealand. The pound fell versus the dollar after an index of U.K. retail sales dropped in July to a 25-year low.

``A lot of bad news has been priced in,'' said Alan Ruskin, head of international currency strategy in North America at RBS Greenwich Capital Markets Inc. in Greenwich, Connecticut.

The dollar increased 0.8 percent to $1.5616 per euro at 10:28 a.m. in New York, from $1.5741 yesterday. It touched $1.5596, the strongest level since June 25. The U.S. currency appreciated 0.7 percent to 108.18 yen, from 107.46, and reached 108.29, the highest since June 25. The euro traded at 169.13 yen, compared with 169.17.

Sterling weakened 0.6 percent to $1.9813 after the Confederation of British Industry said its survey of 82 retailers showed 25 percent sold more goods than a year earlier and 61 percent sold fewer. The net rounded balance of minus 36 percentage points was the lowest since the survey began in 1983.

Weaker Yen

The yen declined earlier against the dollar after government reports showed Japan's unemployment rate rose in June to 4.1 percent, the highest level in almost two years, and household spending fell, adding to signs the economy's longest postwar expansion may be ending.

The New Zealand dollar fell against all of the other major currencies after a report showed home building approvals decreased 20 percent in June to 1,337, the lowest since October 1986. The kiwi declined 1.2 percent to 73.66 U.S. cents.

``At this stage, bad news in the U.S. will be translated to bad news elsewhere,'' Ruskin said. ``It provides some cushion to the dollar.''

In France, a gauge of consumer sentiment dropped in July to minus 48, the lowest level since the index was introduced in 1987, from minus 46 in June, according to Insee, the national statistics office in Paris.

``The euro-zone economy's outlook has really become more bleak,'' said Jan Lambregts, head of Asia research at Rabobank International in Hong Kong. ``Ultimately, that means the upside for the euro-dollar is becoming more capped.'' The euro will decline to $1.55 by year-end, Rabobank forecasts.

European Outlook

Traders reduced bets the ECB will raise its 4.25 percent main refinancing rate this year. The implied yield on the December Euribor futures contract dropped to 5.09 percent, from 5.12 percent yesterday.

The Conference Board's confidence index rose this month to 51.9, higher than forecast, from a revised 51 in June. The Standard & Poor's 500 Index increased 1.2 percent, after falling 1.9 percent yesterday.

Crude oil for September delivery dropped as much as 1.5 percent to $122.92 a barrel. The euro-dollar exchange rate and oil have moved in the same direction 90 percent of the time during the past year, according to Bloomberg calculations based on the correlation of their value changes.

China's yuan advanced after central bank Governor Zhou Xiaochuan underscored policy ``continuity,'' spurring speculation China will let the currency rise further to stem inflation. The yuan climbed 0.1 percent to 6.8256 per dollar.

Dollar Falls Against Euro, Yen on Credit Losses, Oil Increase

Dollar Falls Against Euro, Yen on Credit Losses, Oil Increase

July 28 (Bloomberg) -- The dollar declined from near a three-week high against the euro and the strongest in a month versus the yen on concern U.S. financial losses will widen and as crude-oil prices increased.

The currency dropped for a second day against the euro after Federal Reserve Bank of Minneapolis President Gary Stern told the Financial Times the U.S. credit crunch will get worse. The pound fell against all of the other major currencies as U.K. house values dropped in July the most in at least seven years.

``The financial sector is far from being healthy,'' said Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New York. ``The Fed won't be able to raise rates any time soon given what's happening in the credit market. It's very difficult for the dollar to have a sustained rally.''

The dollar fell 0.3 percent to $1.5758 per euro at 8:41 a.m. in New York, from $1.5709 on July 25. It touched $1.5629 on July 24, the strongest since July 7. The dollar will trade in a range of $1.5650 to $1.5950 in the next few weeks, Serebriakov said. The U.S. currency dropped 0.2 percent to 107.61 yen, from 107.84, after earlier reaching 108.07, the highest since June 26. The euro traded at 169.55 yen, compared with 169.40. It touched the all-time high of 169.96 on July 23.

The pound decreased 0.2 percent to $1.9868 after Hometrack Ltd., a London-based research company, said U.K. house values dropped in July 4.4 percent from a year earlier. That's the biggest annual drop since the index started in 2001. Sterling weakened 0.5 percent to 79.24 pence per euro.

Chinese Yuan

The Chinese yuan fell 0.2 percent to 6.8345 per dollar after the Communist Party's Politburo said on July 25 that growth and inflation are both priorities, fueling speculation that the government will curb currency appreciation to aid exporters. The yuan has strengthened 7 percent this year, the most among Asia's 10 most-traded currencies outside Japan.

The Australian dollar traded at 95.63 U.S. cents after touching 95.28 cents, the lowest in almost three months. Australia & New Zealand Banking Group Ltd., the nation's fourth- biggest bank by market value, joined National Australia Bank Ltd., the largest in terms of assets, in warning of increased provisions for non-performing loans.

Six months after correctly identifying Australia's dollar as one of the best bets in the foreign-exchange market, Daiwa Asset Management Co., the biggest investor in the nation's debt, predicts that the rally is coming to an end. Daiwa, which holds 4 percent of the government's bonds, expects the currency to close the year at $1.

Price Index

The credit crunch is likely to last for months and may deteriorate further, Stern said in an interview with the Financial Times. Financial firms have reported $467.9 billion in losses and writedowns since the start of 2007.

U.S. home prices in the S&P/Case-Shiller index fell 16 percent in May from a year ago, the most on record, according to the median forecast of 21 economists surveyed by Bloomberg News. The report is due tomorrow. Nonfarm payrolls fell by 75,000 in July, following a decline of 62,000 in June, according to a separate survey. The Labor Department will release the employment data on Aug. 1.

``Data on housing and payrolls pose downside risks to the dollar,'' said Akifumi Uchida, deputy general manager of the marketing unit at Sumitomo Trust & Banking Co. in Tokyo. ``Given the state of the housing market, you can't be overly optimistic on the U.S. economy. That makes it almost impossible for the Fed to raise rates.'' The dollar may fall to 106 yen this week, he said.

Fed Rate Outlook

Futures on the Chicago Board of Trade show a 93 percent chance the Fed will keep borrowing costs on hold at 2 percent when it announces its next decision on Aug. 5, up from 64 percent odds a month ago.

Consumer confidence in Germany dropped to the lowest in more than five years as soaring energy prices sapped purchasing power. GfK AG's index for August, based on a survey of about 2,000 people, declined to 2.1, the lowest since June 2003, from a revised 3.6 in July, the Nuremberg-based market-research company said in a statement today.

``The European economy is facing a major setback,'' wrote Tomoko Fujii, head of Japan economics and strategy at Bank of America in Tokyo, in a research note today. ``The markets cannot price in an ECB rate hike anymore. We are recommending euro- selling against the dollar.'' The 15-nation currency may fall to $1.54 against the dollar by the end of September, she said.

Crude oil for September delivery gained as much as $1.96 to $125.22 a barrel in electronic trading on the New York Mercantile Exchange. Oil has tumbled about $23 a barrel from the record $147.27 a reached on July 11.

EUR/USD - Euro Dollar Analisa

EUR/USD - Euro Dollar

Short term (Intraday)

1,5882. EUR USD is in a range between 1,5800 and 1,5950. EUR USD moves without trend and swings around exponential moving averages (EMA 50 and 100). The volatility is low. ForexTrend 4H, daily (Mataf Trend Indicator) is in a bullish configuration. The price should continue to move in 1,5800 / 1,5950 range. We won't take a position.

Resistances

1,5910 - 1,5950

Supports

1,5870 - 1,5800

Long term chart

EUR/USD - Euro Dollar

updated 22 juli 2008 13:29 GMT

Dollar Advances as Paulson Stresses Support for U.S. Currency

Dollar Advances as Paulson Stresses Support for U.S. Currency

July 22 (Bloomberg) -- The dollar rose the most against the euro in almost a week as Treasury Secretary Henry Paulson voiced support for the currency and the Federal Reserve Bank of Philadelphia president said interest rates should be raised.

The greenback extended its gain after breaking $1.59, where orders to sell the euro were clustered, and increased further as crude oil prices fell, traders said. The Canadian dollar dropped against all of the other major currencies as a report showed domestic retail sales rose in May less than economists forecast.

``The feeling is that we're at a turning point and things are going to get better from here in the financial sector,'' said Brian Dolan, chief currency strategist at FOREX.com, a unit of online currency trading firm Gain Capital in Bedminster, New Jersey. Paulson's comments ``helped the market get over the mass hysteria about Fannie and Freddie.''

The dollar increased 0.4 percent to $1.5851 per euro at 10:28 a.m. in New York, from $1.5922 yesterday. It fell to $1.6038 on July 15, the weakest since the European currency's 1999 debut. The dollar advanced 0.4 percent to 106.86 yen, from 106.45. The yen was little changed at 169.40 per euro, compared with 169.48, after falling to a record of 169.91 yesterday.

South Africa's rand was the biggest gainer versus the dollar among the world's major currencies as gold prices increased and platinum advanced for the first time in seven days. South Africa produces about 10 percent of the world's gold and almost 80 percent of its platinum. The rand increased 0.4 percent to 7.5378 versus the dollar.

Canadian Dollar

Canada's dollar fell for the first time in three days against its U.S. counterpart, dropping 0.6 percent to C$1.0055 per U.S. dollar. Retail sales rose 0.4 percent in May to C$35.8 billion ($35.7 billion), Statistics Canada said today in Ottawa. The median forecast of 22 economists surveyed by Bloomberg News was for an increase of 0.6 percent.

The U.S. dollar strengthened today as Paulson said in a speech in New York that he's ``confident'' that lawmakers will pass the bill to ``boost confidence'' in Fannie Mae and Freddie Mac, the largest sources of U.S. mortgage financing. He reiterated that a strong dollar is ``really very important.''

The dollar touched the record low earlier this month on concern Fannie and Freddie, which own or guarantee almost half of the $12 trillion in U.S. home loans outstanding, may fail to survive the housing slump.

Plosser on Rates

Philadelphia Fed President Charles Plosser said in a speech today in King of Prussia, Pennsylvania, that the U.S. central bank should raise interest rates ``sooner rather than later.'' He argued against reductions in two Fed decisions this year.

Two-year U.S. Treasury yields rose 7 basis points, or 0.07 percentage point, to 2.66 percent. The yield advantage of comparable-maturity German bunds narrowed to 191 basis points.

``Plosser's hawkish comments pushed Treasury yields higher,'' contributing to the dollar's turnaround, said Matthew Kassel, director of proprietary trading at ING Financial Markets LLC in New York.

Futures traded on the Chicago Board of Trade showed a 7 percent chance the Fed will increase its 2 percent target rate for overnight lending between banks by a quarter-percentage point at its Aug. 5 meeting, compared with 40 percent odds a month ago.

The euro traded earlier near an all-time high versus the dollar as the Italian daily La Stampa reported that European Central Bank executive board member Lorenzo Bini Smaghi said the bank's main refinancing rate isn't ``exactly restrictive'' at 4.25 percent.

`Hawkish Noises'

``The ECB has continued to make hawkish noises, meaning the euro is going to be quite well-supported in the near term,'' said Ian Stannard, a London-based senior currency strategist at BNP Paribas SA. The dollar may still rebound to $1.50 by the end of the quarter, he said.

The euro may climb past 170 to an all-time high against the yen as the ECB raises rates a second time this year while the Bank of Japan leaves its benchmark rate unchanged at 0.5 percent, according to Commerzbank AG.

``The Japanese yen has to bear the consequences from having been unable to benefit from falling equity markets over the last weeks,'' currency strategists at the firm led by Frankfurt-based Ulrich Leuchtmann wrote in a note to clients. ``On the backdrop of low key rates, which are unlikely to see any changes in the near future, the general environment will remain difficult for the Japanese currency.''