Dollar news

Dollar Rises on U.S. Productivity, Signs of European Slowdown

May 7 (Bloomberg) -- The dollar rose against the euro and the yen as U.S. productivity unexpectedly accelerated in March while Europe showed signs of an economic slowdown.

The currency appreciated for the first time in three days versus the euro as the yield advantage of German bunds over Treasuries decreased to the narrowest in more than two months. The pound fell to a 2 1/2-month low against the dollar after an industry report showed U.K. consumer confidence declined last month to the weakest in at least four years.

``Market sentiment is shifting to a more positive outlook for the dollar,'' said Camilla Sutton, co-head of currency strategy at Scotia Capital Inc. in Toronto. ``In the near term, there's a real reason the dollar should strengthen on the back of weaker European data.''

The dollar increased 1 percent to $1.5378 against the euro at 10:30 a.m. in New York, from $1.5532 yesterday. The U.S. currency rose 0.6 percent to 105.43 yen, from 104.77. The euro fell 0.4 percent to 162.15 yen, from 162.71.

The U.S. currency strengthened as the Labor Department reported that worker productivity unexpectedly accelerated in the first quarter, indicating the world's largest economy can expand with lower inflation.

Hoenig on Inflation

The dollar started its gain as Federal Reserve Bank of Kansas City President Thomas Hoenig said in a speech in Denver yesterday that ``serious'' U.S. inflation pressure may compel the central bank to increase interest rates.

``There is a significant risk that higher inflation will become embedded in the economy and require significant monetary policy tightening to reduce it,'' said Hoenig, a nonvoting Fed official this year.

The British pound dropped 0.8 percent versus the Canadian dollar and 0.7 percent against the Swedish krona after Nationwide Building Society said an index of sentiment in the U.K. declined to the lowest level since the survey began in May 2004. The pound fell as much as 1.1 percent to $1.9518, the weakest since Feb. 21. It decreased 0.2 percent to 78.87 pence against the euro.

The U.S. currency has rebounded 3.7 percent versus the euro since April 22, when it sank to a record low of $1.6019. The Fed said rate reductions to date were ``substantial'' after lowering its target lending rate last week by a quarter-percentage point to 2 percent, its seventh cut since September.

Dollar Outlook

The dollar will rise to $1.47 against the euro in three months because the Fed may not lower interest rates any further, according to UBS AG, the world's second biggest currency trader.

``Macro developments are supportive for the dollar continuing to strengthen,'' wrote Geoffrey Yu, Zurich-based strategist at UBS, in a research note today. ``Fed members stepped up hawkish commentary.''

The spread between two-year German notes and similar- maturity U.S. Treasuries reached 1.36 percentage points today, the narrowest since late February, making dollar-denominated assets more attractive to investors. The European Central Bank will leave its main refinancing rate at a six-year high of 4 percent tomorrow, according to all 53 economists surveyed by Bloomberg News.

Retail sales in the euro area declined 1.6 percent in March from a year earlier, the biggest drop since the data began in 1995, the European Union's statistics office said today. Sales fell 0.4 percent from the prior month.

German Manufacturing

The euro extended its drop versus the dollar after a government report showed German manufacturing orders dropped 5 percent in the year ended in March, compared with an 8.9 percent increase the prior month.

``The ECB has already shifted from a pretty hawkish stance to something close to neutral,'' said Meg Browne, a senior currency strategist at Brown Brothers Harriman & Co. in New York. ``We expect the European data to continue to deteriorate and the ECB to shift to a more dovish stance.''

The Dollar Index traded on ICE futures in New York, which tracks the currency against those of six trading partners, rose to 73.531, from 72.999 yesterday.

``We're dollar bulls,'' said Michael Metcalfe, the head of macro strategy in London at State Street Global Markets, a unit of the world's largest money manager for institutions. ``We've seen the top in euro-dollar.''

EURO NEWS

Euro Rises on Speculation ECB to Keep Rates at Six-Year High

May 5 (Bloomberg) -- The euro rose against the dollar for the first time in three days on speculation the European Central Bank will keep interest rates at a six-year high this week to control inflation.

The 15-nation currency, down 3.4 percent versus the dollar after reaching a record on April 22, appreciated as ECB President Jean-Claude Trichet said the risk of inflation is ``significant.'' The Australian and New Zealand dollars increased versus the U.S. dollar as commodity prices rose.

``Hawkish tones from the ECB will keep the euro'' in demand, said Dustin Reid, a senior currency strategist in Chicago at ABN Amro Bank NV. ``The market is very focused on any type of price data coming out of Europe.''

The euro rose 0.2 percent to $1.5456 at 10:29 a.m. in New York, from $1.5424 on May 2. It reached a record of $1.6019 on April 22. The euro rose 0.2 percent to 162.82 yen, from 162.53 yen. The dollar traded at 105.42 yen, compared with 105.40 yen.

The U.S. currency pared its drop against the euro as a private report showed service industries expanded in April. The Institute for Supply Management's index of non-manufacturing businesses, which make up almost 90 percent of the economy, increased to 52, from 49.6 the prior month.

The median forecast of 68 economists surveyed by Bloomberg News was for a reading of 49.1. Fifty is the dividing line between growth and contraction.

The Australian dollar advanced 0.7 percent to 94.15 U.S. cents and the New Zealand dollar increased 0.5 percent to 78.38 U.S. cents as the UBS Bloomberg Constant Maturity Commodity Index rose 2 percent on May 2, its first increase in four days.

Exports of raw materials contribute about 17 percent to Australia's economy, while more than a third of New Zealand's export income comes from meat, wool and dairy products.

Weaker Pound

The pound fell 0.6 percent to 78.66 pence against the euro, from 78.23 pence at the end of last week. The Bank of England will keep its benchmark rate at 5 percent on May 8, according to the median forecast of 61 economists surveyed by Bloomberg News. Markets were closed in London for May Day. Sterling dropped 0.2 percent to $1.9688, from $1.9717.

The ECB will leave its main refinancing rate at 4 percent when policy makers meet May 8, according to all 53 economists in a separate Bloomberg News survey. The Federal Reserve cut the target rate for overnight lending between banks by a quarter- percentage point to 2 percent on April 30, the seventh reduction since September.

``The recent rebound in the dollar is unlikely to be sustained given the fundamentals,'' said Michael Klawitter, a currency strategist in Frankfurt at Dresdner Kleinwort, the investment bank owned by Allianz SE, Europe's biggest insurer. ``As such, the euro should gain some ground, at least in the near term.''

Inflation Ceiling

Inflation will exceed the ECB's ceiling of 2 percent for a 10th year, according to the European Commission. Inflation expectations in the euro region, measured by the difference between the yields of nominal and inflation-protected bonds, increased as crude oil traded near a record and commodity prices spiraled higher.

The so-called breakeven rate on 10-year French inflation- linked notes rose to 2.33 percentage points today, from 2.08 percentage points a year ago, reflecting the rate of price growth investors expect over the next decade.

The dollar posted its second consecutive weekly advance against the euro last week on speculation the Fed will stop raising interest rates and the European economy will start to slow down.

Fed Rate

Interest-rate futures on the Chicago Board of Trade on May 2 showed an 86 percent chance U.S. policy makers will keep the target lending rate on hold when they next meet June 25, compared with 80 percent odds on May 1. The balance of bets is for a cut of a quarter-percentage point.

Traders are betting for the first time since December 2005 that the dollar will gain versus the European currency, according to figures from the Washington-based Commodity Futures Trading Commission.

The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain, known as net shorts, was 21,315 on April 29, compared with net longs of 18,907 a week earlier.

``We may have seen a short-term low in the euro on Friday,'' said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto. ``With the build-up of the short euro position, the risk is that the ECB stays quite hawkish.''

As Russia's Dmitry Medvedev prepares to be sworn in as president on May 7, Merrill Lynch & Co., Goldman Sachs Group Inc. and Deutsche Bank AG predict gains of as much as 4 percent in the ruble in the next six months against a currency basket made up of 0.55 dollars and 0.45 rubles.

The firms say pressure will mount on the Russian central bank to let the ruble appreciate to stem inflation even if it risks damping profits of oil and energy exporters, which according to Merrill Lynch fund more than half of the federal budget. The ruble rose 0.2 percent to 23.7503 against the dollar today, from 23.8012 on May 2.

Dollar Rises to Three-Week High on Bets Fed Will Signal Pause

Dollar Rises to Three-Week High on Bets Fed Will Signal Pause

April 29 (Bloomberg) -- The dollar strengthened to a three- week high against the euro on speculation the Federal Reserve will signal that it's done lowering interest rates.

The currency is headed for its first monthly advance against the euro this year, and also gained versus the Norwegian krone and pound today, as interest-rate futures show the Fed may lower borrowing costs tomorrow and then pause. The pound is poised for its biggest monthly decline against the dollar in 2008 as mortgage approvals in the U.K. sank.

``If the Fed is not at the end of the easing cycle, it's near the end,'' said Jeff Gladstein, global head of foreign- exchange trading at AIG Financial Products in Wilton, Connecticut. ``I don't think the dollar will strengthen aggressively by any stretch, but I do think it's trying to bottom.''

The dollar rose 0.4 percent to $1.5596 per euro at 10:26 a.m. in New York, from $1.5657 yesterday. It touched $1.5541, the strongest level since April 3. The dollar declined 0.8 percent to 103.33 yen, from 104.19 yesterday. The euro weakened 1.2 percent to 161.20 yen, from 163.11.

The U.S. currency has increased 4 percent against the yen and 1.4 percent versus the euro this month. The dollar fell to $1.6019 against the euro on April 22, the lowest level since the European currency debuted in 1999.

Futures on the Chicago Board of Trade show an 82 percent chance the Fed will cut the target rate for overnight lending by a quarter-percentage point to 2 percent and a 71 percent likelihood that the rate will be held at that level in June.

New Zealand Dollar

New Zealand's dollar weakened against all of the major currencies after a government report showed the annual trade deficit unexpectedly widened in March. The kiwi declined 1.5 percent to 77.42 U.S. cents after touching 77.27, the lowest level since Jan. 28.

Australia's dollar dropped 0.8 percent to 93.12 U.S. cents after the New York-based Conference Board's Australian index of leading economic indicators fell in February for a third month.

The pound weakened today after the Bank of England said banks granted 64,000 loans for house purchases in March, the lowest level in at least nine years, as the credit-market freeze prompted banks to reduce lending.

Sterling fell 0.9 percent to $1.9735 per dollar, from $1.9914, dropping 0.5 percent this month. The British currency decreased 0.4 percent to 78.92 pence per euro, from 78.62 pence. The dollar rose 0.8 percent to 5.1297 versus Norway's krone.

Bond Spread

The European currency's decline against the dollar accelerated as Deutsche Bank AG, the world's largest currency trader, reported its first quarterly loss in five years after writing down the value of loans for leveraged buyouts and asset- backed securities by 2.7 billion euros.

European retail sales dropped the most in more than four years in April as rising fuel and food prices squeezed shoppers' budgets, the Bloomberg purchasing managers index showed today. French consumer confidence dropped this month to a record low as accelerating inflation squeezed incomes.

``You have a re-emergence of the recoupling theme that the slowdown in the U.S. is spreading to other countries,'' said Michael Malpede, a senior currency analyst in Chicago at Man Global Research. ``The dollar, which has been on its knees, is in a short-term bottoming process.''

Investors should sell the euro against the dollar over the next several weeks because two-year German bunds have lost some of their yield advantage over comparable-maturity Treasuries, said Citigroup Inc., one of the 10 biggest currency traders. The yield difference, or spread, between the two securities has decreased to 1.46 percentage points, from 1.85 on March 31, the most since the euro was launched in 1999.

ECB Rate

European Central Bank policy makers have held the main refinancing rate at a six-year high of 4 percent since June to contain inflation. The U.S. central bank has cut its fed funds target 3 percentage points to 2.25 percent since September.

Gains in the dollar may stall at 106.60 yen, said Masashi Kurabe of Bank of Tokyo-Mitsubishi UFJ Ltd., citing charts that traders use to predict price movements.

The resistance level for the dollar is a 38.2 percent reversal of its decline to a low of 95.76 yen on March 17 from a high of 124.13 yen on June 22, based on the Fibonacci series of numbers. Resistance is a level where sellers may outnumber buyers.

``The dollar may reach that level in one month, but will face strong resistance around there,'' said Kurabe, head of the foreign-exchange sales and trading group in Hong Kong at Japan's second-largest bank by assets.

The U.S. currency remained higher against the euro as the Conference Board reported that confidence among U.S. consumers fell less than forecast this month. The New York-based research group's index of sentiment dropped to 62.3, the lowest level since March 2003, from a revised 65.9 in March. The median forecast of 67 economists surveyed by Bloomberg News was for the gauge to fall to 61 from a previously reported 64.5.

GBP/JPY - British Pound Yen

Short term (Intraday)

205,29. GBP JPY moves without trend and swings around exponential moving averages (EMA 50 and 100). The volatility is low. Bollinger bands are flat. Oscillators are neutral. The price should continue to move in 202,00 / 206,50 range. We won't take a position. BUt this is to risk to take position

205,60 - 206,50

Supports

203,60 - 203,00

Long term chart

GBP/JPY - British Pound Yen

updated 22 avr 2008 13:10 GMT

EUR / USD prediction

The euro gave back recent gains vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ $1.5845 level and was capped around the $1.5985 level. The common currency came within fifteen pips of testing the psychologically-important US$ 1.6000 figure before traders booked profits. Data released in the U.S. today saw the April Philadelphia Fed manufacturing survey fall to -24.9 in April from -17.4 in March while the March leading index moved higher 0.1% - the first increase in six months. It was also reported that weekly initial jobless claims climbed 17,000 to 372,000 while continuing jobless claims rose 26,000 to 2.984 million, the highest since June 2004. Federal Reserve Vice Chairman Kohn today suggested a more permanent “liquidity backstop” for primary dealers to maintain the orderly functioning of the U.S. securities market. In eurozone news, European Central Bank member Weber hawkishly reported the ECB’s staff may need to upwardly revised inflation expectations in June. The most recent assessment by the ECB in March projected an average inflation rate of around 2.9% for 2008. Eurogroup President Juncker verbally intervened against the euro’s rise today saw the markets should not underestimate the Group of Seven’s comments this past weekend about currencies. The ECB’s April bulletin was released today and reported temporarily high inflation rates may remain for some time, principally on account of elevated food and energy prices. EMU-15 economic data released today saw the EMU-15 trade surplus reach €800 million in February. Euro bids are cited around the US$ 1.5345 level.

Euro Advance Against Dollar May Stall on Charts, Citigroup Says

Euro Advance Against Dollar May Stall on Charts, Citigroup Says

April 9 (Bloomberg) -- The euro's advance against the dollar may stall after its failure to strengthen beyond so- called resistance at $1.5805, said technical analysts led by Tom Fitzpatrick at Citigroup Global Markets Inc.

Resistance at $1.5805 represents a 76.4 percent Fibonacci retracement of the euro's decline from its record high of $1.5903 on March 17 to $1.5341 on March 24, according to Citigroup's chart. Since March 24, the euro has rallied 2 percent. Resistance is where sell orders may be clustered.

``The euro-dollar headed higher in its continuing gravity- defying performance, but we still feel that this elevated level is difficult to sustain,'' wrote Citigroup's analysts, including New York-based Fitzpatrick, global head of currency strategy, in a research note yesterday.

Europe's single currency traded at $1.5703 as of 1:40 p.m. in Tokyo from $1.5712 late in New York yesterday, when it reached $1.5798, its highest since March 31.

``While we still remain biased to believe the euro-dollar may head lower, we need a move through good support levels to support this view,'' the analysts wrote, citing support at $1.5628, between $1.5510 and $1.5574, and at $1.5341.

The $1.5628 level is the April 7 low, the area between $1.5510 and $1.5574 includes the April 3 low, and the $1.5341 level is the March 24 low, according to data compiled by Bloomberg. Support is where buy orders may be clustered.

``We need a break below $1.5341 to validate this view and suggest a sub-$1.48 move,'' the analysts wrote. A level below $1.48 would be the euro's lowest since Feb. 26.

Fibonacci analysis is a mathematical formula based on the theory that prices rise or fall by certain percentages after reaching a high or low. Other Fibonacci points are 23.6 percent, 38.2 percent, 50 percent and 61.8 percent. A break of one indicates a currency may move to the next, while a failure suggests a trend may stall.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

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