Euro Falls From Four-Month High Reached on ECB Interest Rate Speculation

The euro fell against the dollar from the highest level in almost four months as European Union leaders failed to solidify a permanent bailout mechanism during a summit ended yesterday. 

Declines in the 17-nation currency this week were limited by speculation the European Central Bank will increase interest rates in April. The dollar fell against currencies linked to commodities, with the Australian dollar strengthening to the most versus its U.S. counterpart since foreign-exchange controls ended in 1983, before a report that may show U.S. private employers added 222,000 jobs in March. 

“EU leaders, they sound fairly optimistic no country after Portugal may need a bailout, but it’s too early to say that for sure and I don’t see any justification for euro to be up even this high,” said Blake Jespersen, director of foreign exchange in Toronto at Bank of Montreal. “The market continues to have fairly good risk appetite, despite the turmoil going on.” 

The euro fell 0.7 percent to $1.4088 in New York, from $1.4182 in the week ended March 18. It touched $1.4220 on March 22 the highest level since Nov. 5. The shared currency fell to 114.59 yen, from 114.31. The dollar strengthened versus the yen to 81.34, from 80.58.

Euro Trends

The euro weakened 0.5 percent against a basket of nine- developed nation currencies in the past week, according to Bloomberg Correlation Weighted Indexes. Futures show traders added to bets on higher borrowing costs in the region, with the implied yield on the three-month Euribor contract expiring in September rising 0.2 percentage point to 1.83 percent. 

Jean-Claude Trichet, the ECB President, told the European Parliament March 21 he has “nothing to add” to his March 3 remarks when he said policy makers may raise the benchmark rate from a record low of 1 percent at their next meeting April 7. The Federal Reserve remains committed to keeping short-term interest rates low for an extended period. 

EU leaders were divided about how to get the euro-region stopgap fund up to its capacity of 440 billion euros ($624 billion) to ease credit woes. European leaders pushed back the decision on funding a bailout mechanism to June.

‘A Little Wary’

“European leaders have shown that in crisis times they can get things done,” said Brian Kim, a currency strategist at UBS AG in Stamford, Connecticut. “However, people are a little wary at this point.” 

Fitch Ratings cut Portugal’s credit rating after the nation’s Prime Minister Jose Socrates resigned March 23.

Two European officials said a bailout for Portugal may total as much as 70 billion euros. Portugal made up about 1.8 percent of the total 17-nation euro-zone gross domestic product in the fourth quarter last year, according to Eurostat, the EU’s statistics office, and Bloomberg data, while Ireland accounts for 1.8 percent and Greece makes up 2.3 percent. 

Portugal hasn’t asked for a bailout and the figures are preliminary, the officials said. The action would follow Greece and Ireland’s request of aid from the EU and the International Monetary Fund.

Dollar Index

The Dollar Index, which tracks the currency against six major trading partners, rose 0.6 percent to 76.151, from 75.718. The dollar fell on a weekly basis against the New Zealand, Australia, South African and Canadian currencies as the price of raw materials surged. 

The Reuters/Jefferies CRB Index jumped 2.2 percent, the biggest weekly gain since March 4.

Australia’s dollar rose as much as 0.8 percent to $1.0294 yesterday, as technical levels were triggered.

“There were a lot of orders sitting above the $1.0255-60 level and so when it broke the level a lot of stops were triggered and we saw a very very quick move,” said Kathy Lien, director of currency research with online currency trader GFT Forex in New York. Traders place automatic buy and sell orders, known as stops, at predetermined prices to limit losses. 

The yen fell for the first time in three weeks against the dollar in the week after the Group of Seven nations intervened to bring the currency down from a postwar high.

Yen Path

The yen surged to a post-World War II high of 76.25 versus the dollar on March 17 after a 9.0-magnitude earthquake and tsunami struck Japan on March 11, damaging cooling systems at a nuclear-power plant north of Tokyo. 

Switzerland’s franc fell against all its major counterparts last week. The move follows the franc’s biggest five-day gain versus the greenback since June, as investors sought a haven amid lingering tensions in the Middle East, according to the Swiss National Bank. 

The franc weakened 2.1 percent to 91.99 centimes per dollar, after gaining 3.1 percent the week ended March 18. 

“The franc was just overdone and now we’re seeing a move the other way,” said Tim O’Sullivan, chief trader at FOREX.com, a unit of the online currency trading company Gain Capital in Bedminster, New Jersey. “I still think it’s a good play to buy Swiss and sell dollars in this environment.” 

The pound fell against most of its major counterparts, excluding the franc, after the Bank of England minutes showed policy makers voted 6-3 to keep rates steady on March 10 and saw “merit in waiting” to assess the effect of higher oil prices on the economy. 

The currency was also pressured as Chancellor of the Exchequer George Osborne said the British economy will more grow more slowly this year than previously forecast. The Office for Budget Responsibility predicts annual growth in 2011 of 1.7 percent, down from the 2.1 percent forecast in November, Osborne said.

Britain’s currency fell 1.2 percent to $1.6042, from $1.6234 the previous week. 

Source: Bloomberg By Allison Bennett 

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Japan’s Recession Threat Lessens Following G-7’s Joint Intervention on Yen

Japan’s risk of becoming the first Group of Seven member to return to a recession after the global financial crisis eased as the G-7 intervened to halt the yen’s appreciation. 

The G-7’s yen sales sent the currency down the most since September, to 80.58 per dollar at the close yesterday in New York, compared with the postwar high of 76.25 reached March 17. Japan’s Vice Finance Minister Fumihiko Igarashi said in an interview “we confirmed” further intervention could be done. 

“The risks to the downside for Japan’s economy were reduced significantly by the G-7 intervention,” said Takuji Aida, a senior economist at UBS AG in Tokyo. “This coordinated action may help corporate sentiment to recover, a key factor in reviving growth, along with public spending.” 

Reduced scope for yen gains would limit damage to exporters’ earnings once companies from Toyota Motor Corp. to Sony Corp. restart factories. Focus now turns to the duration of electricity cuts in the aftermath of the nation’s record earthquake. At the crippled Fukushima Dai-Ichi nuclear power plant, engineers worked to restore power used for pumps needed to protect fuel rods from overheating and releasing radiation.

Paring Loss

The Nikkei 225 (NKY) Stock Average closed 2.7 percent higher yesterday, paring its slide since the disaster to 12 percent. The tumble in equities in the aftermath of the quake, in conjunction with the rising yen, threatened to impair companies’ balance sheets ahead of the March 31 close to the fiscal year. 

To aid companies with fund-raising concerns, Prime Minister Naoto Kan’s government may provide more than 10 trillion yen ($124 billion) of loans, the Nikkei newspaper reported without saying where it obtained the information. 

Japan’s economy, the world’s third biggest, may skirt a contraction and grow about 1 percent this year as the nation rebuilds after the March 11 temblor and tsunami, according to UBS and Nomura Holdings Inc. 

The Federal Reserve, European Central Bank, Bank of England, Germany’s Bundesbank, the Bank of France, the Bank of Canada and the Italian central bank said they joined the yen sales. A Japanese government official said on condition of anonymity that his country probably sold less than 2 trillion yen, the amount it used in its last intervention. Yesterday’s drop in the yen was the biggest since Japan’s unilateral sales on Sept. 15.

‘Very Problematic’

“The risk of the yen rising unchallenged to uncompetitive levels would have been very problematic in an economy where, outside of export dynamism, there’s really been very little dynamic for growth,” said Richard Jerram, head of Asian economics at Macquarie Securities Ltd. in Singapore. The intervention is “a significant help” to the economy, he said. 

Japan’s economy had already shrunk in the fourth quarter of 2010 as government stimulus measures adopted during the global financial crisis were phased out. The nation has suffered limited growth and sustained declines in consumer prices as an aging and shrinking population undercut domestic demand. 

Every one yen that the currency appreciates against the dollar erodes about 30 billion yen from Toyota’s earnings, according to the company. Honda Motor Co., which produces more than 70 percent of its vehicles outside Japan, loses 17 billion yen for each yen the currency strengthens. 

“We won’t manipulate it, but I hope that the yen goes back to where it was before the earthquake,” Igarashi said in the interview in Tokyo March 18. He added that he hoped the G-7 action would put a floor under the currency.

Yen’s Climb

The yen has appreciated 3 percent against the dollar since the close the day before the magnitude-9 quake. The currency, which has now strengthened 19 percent in the past two years, rose in recent days on speculation Japan’s insurers would repatriate overseas assets. Economic and Fiscal Policy Minister Kaoru Yosano has said there was no basis for such speculation. 

Nomura analysts see the economy expanding 1.1 percent this year, 0.4 percentage point less than their estimate before the disaster struck. The earthquake and tsunami ripped apart northeastern towns, killing thousands and damaging nuclear reactors at Tokyo Electric Power Co.’s Fukushima Dai-Ichi plant. Almost 400,000 people remained in evacuation shelters yesterday. 

Soldiers and firefighters from Tokyo, using dozens of fire engines, doused sea water on reactor No. 3 yesterday, after an explosion this week. TEPCO also said it may finish reconnecting a power line to the No. 2 reactor. 

U.S. Optimistic 

Admiral Robert Willard, head of the U.S. Pacific Command, said he was cautiously optimistic that the damage can be contained and a “worst-case scenario will never be encountered.” 

The risks to an economic recovery include an uncertain power supply, with the nation facing rolling blackouts and Citigroup Inc. warning this week that the nation may face an “irreversible” blow to capacity. Household sentiment has also suffered. 

“Japan has little choice but to rely on exports as consumer spending will likely stay weak,” said Junko Nishioka, chief economist at RBS Securities. “Service consumption will likely slump even in the Tokyo area as consumers may be discouraged from going out because of the confusion resulting from the earthquake, such as the power shortage,” she said. 

Before the quake, Japan’s economy was showing signs of a revival, after shrinking an annualized 1.3 percent in the fourth quarter of last year. 

The central bank yesterday repeated its pledge to pursue “powerful monetary easing” and added 3 trillion yen to the financial system, bringing its total emergency fund injections this week to 37 trillion yen. On March 14, it doubled an asset- purchase fund to 10 trillion yen, pledging to step up purchases of securities including government debt, exchange-traded funds and real-estate investment trusts. 

Source: Bloomberg By Keiko Ujikane and Michael Heath 

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Yen Strengthens as Japan's Risk of Radiation Leaks Spurs Demand for Refuge

The yen rose against all of its major counterparts as increased risk in Japan of radiation leaks from a crippled nuclear power station boosted speculation that investors will repatriate assets to pay for earthquake damages. 

The dollar rose and the Swiss franc advanced to a record against the greenback on demand for a refuge as Japan’s Prime Minister Naoto Kan said his government is doing everything it can to contain the radioactive leaks following last week’s earthquake and tsunami. The euro was lower as European Central Bank President Jean-Claude Trichet called “insufficient” a package of economic-oversight rules adopted by European Union finance ministers. 

“It definitely looks like a difficult day for the global financial markets and we see the safe-haven currencies outperforming,” said Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New York. “There’s been some further worrying news from Japan in terms of the situation at the nuclear plant facility.” 

The yen appreciated 1.8 percent to 112.16 versus the euro at 8:55 a.m. in New York, from 114.22 yesterday. The yen advanced 1 percent to 80.79 per dollar, from 81.63. The Japan currency strengthened to almost 80.22 reached Nov. 1, the strongest since April 1995 when it reached a postwar record of 79.75.

The dollar strengthened 0.8 percent to $1.3883 against the euro, from $1.3992.

Dollar Strength

Stocks and U.S. futures sank, with the Nikkei 225 index posting its biggest two-day drop since 1987. The MSCI World Index fell 2.3 percent while Standard & Poor’s 500 Index futures tumbled 2.7 percent. 

IntercontinentalExchange Inc.’s Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners including the euro, yen and pound, rose as much as 0.9 percent to 77.04 in the biggest intraday gain since Feb. 3. 

The franc appreciated 0.4 percent to 92.07 centimes per dollar after touching 91.98, the strongest level since at least 1971, when Bloomberg records begin. 

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most traded currencies excluding the yen, dropped to the lowest level this month on concern related to Japan’s earthquake. 

Currencies of commodity-exporting countries plunged as speculation increased the explosions at the nuclear power station will damp demand for raw materials. 

South Africa’s rand, the worst performer among the major currencies, dropped 2.9 percent to 7.0176 per dollar. 

Australia’s dollar weakened 2.6 percent to 98.38 U.S. cents and Canada’s currency fell 1.9 percent to 99.27 cents per U.S. dollar.

‘Increasingly Alarming’

“It’s increasingly alarming, the state of the situation in Japan,” said Paul Mackel, a currency strategist at HSBC Holdings Plc in London. “When the market goes into a very aggressive risk-off move, these currencies tend to underperform.” 

Malaysia’s ringgit slid 0.8 percent to 3.0615 per dollar, according to data compiled by Bloomberg. South Korea’s won and the Philippine peso weakened 0.5 percent. 

Japan’s stricken Dai-Ichi nuclear power plant was rocked by two further explosions and a fire today as workers struggled to avert the risk of a meltdown. 

A hydrogen blast hit the plant’s No. 4 reactor, where Tokyo Electric Power Co. earlier reported a blaze, Japan’s Chief Cabinet Secretary Yukio Edano said at a briefing. Four of the complex’s six reactors have been damaged by explosions after cooling systems failed when they were wrecked by the magnitude 9 earthquake and deadly tsunami.

Central Bank Action

Further gains in the yen may be limited as the Bank of Japan pumps more money into financial markets, according to analysts at BNP Paribas SA. 

“The BOJ will have to take a bigger responsibility to fund the rebuild of the Japanese economy, suggesting it will intensify its quantitative-easing program,” BNP analysts including Hans-Guenter Redeker, global head of currency strategy in London, wrote in an e-mailed report today. “The projected boost of the BOJ’s balance sheet should work against the yen.” 

The BOJ added 5 trillion yen to the financial system in a one-day operation today. BOJ Governor Masaaki Shirakawa has pledged to keep pouring cash into the economy to stabilize markets. The bank injected 15 trillion yen ($6 billion) yesterday and doubled its asset-purchase program to 10 trillion yen, an increase that’s about one-tenth the size of the Fed’s program of buying Treasuries.

German Index

The euro stayed lower versus the dollar as the ZEW Center for European Economic Research in Mannheim said its index of German investor and analyst expectations dropped to 14.1 this month from 15.7 in February. Economists had expected a gain to 15.9, according to the median forecast of 38 economists in a Bloomberg News survey. 

ECB President Trichet was critical as euro-zone leaders negotiated an accord to allow primary-market bond purchases that will offer a lifeline to aid recipients in return for austerity commitments. Leaders will allow the facility to spend its full 440 billion-euro capacity, removing restrictions that would have capped outlays at about 250 billion euros ($350 billion), though it won’t be used to finance bond buybacks for debt-strapped states. 

“We continue to think that the improvement in governance that is presently envisaged is in our opinion insufficient to draw the lessons from the crisis,” Trichet told ministers at a meeting in Brussels today where the measures were approved. 

A final agreement is slated for a summit on March 24-25. 

Source: Bloomberg By Catarina Saraiva and Keith Jenkins 

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Japan Faces ‘Another Leg Down’ in Its Fiscal Health After Quake

The cost of rebuilding from Japan’s strongest earthquake on record will worsen the country’s challenge of reining in the world’s biggest public debt even as damage to the economy may be limited, analysts said. 

The 8.9 magnitude shock devastated areas of northeast Japan including parts of Sendai, a city of 1 million that’s 300 kilometers (186 miles) north of Tokyo. The Tohoku region accounts for about 8 percent of gross domestic product, is host to factories making products from cars to beer, along with energy infrastructure including a nuclear power plant the government said is at risk of meltdown after an explosion. 

Factory shutdowns, power cuts and the damage to consumer confidence may hurt Japan’s GDP for a period of months, while later contributing to growth as rebuilding occurs, economists said. Paying for the rebuilding risks hurting demand for Japanese government bonds, said Alicia Ogawa. 

“A supplementary budget is like the last thing that people watching the JGB market want to hear,” said Ogawa, adjunct professor at Columbia University’s School of International and Public Affairs in New York, and a former Japanese banking analyst who lived in the nation for 15 years. The prospect of rebuilding “signals another leg down in Japan’s fiscal health. So I’m concerned that in the short to medium run, there’s going to have to be more borrowing,” she said.

Debt Load

The Ministry of Finance projected in January that government debt will increase 5.8 percent to a record 997.7 trillion yen ($12.2 trillion) in the year starting April 1. That signaled Prime Minister Naoto Kan would break his pledge to limit bond sales to 44.3 trillion yen a year. 

For Kan, the task of assembling a reconstruction plan adds to a burden that includes his failure so far to persuade opposition lawmakers to enact bills allowing the government to sell deficit-financing bonds in the coming fiscal year. The largest opposition party has signaled it’s prepared to endorse post-earthquake spending. 

“We will probably need a supplementary budget to work on this,” Sadakazu Tanigaki, who heads the Liberal Democratic Party, told reporters yesterday after Kan convened a meeting of party leaders. “We will cooperate with all our might.” 

Japan’s bond market has so far failed to signal concern at the fiscal outlook, with more than 90 percent of government debt held by domestic investors led by financial companies. The yield on the benchmark security due in 2021 was 1.27 percent late yesterday in Tokyo, compared with an average of 1.39 percent over the past decade.

Risk to Yields

“This situation is likely to reverse as the government ramps up spending -- and deficit financing -- to repair the damage,” Dan Ryan, an economist at Lexington, Massachusetts- based IHS Global Insight. “Considering that Japan’s sovereign debt was recently downgraded, financial markets may become more wary of even an incremental increase in government borrowing and bond issuance.” 

Japan’s rating outlook was lowered to negative from stable by Moody’s Investors Service Feb. 22 on concern that political gridlock will constrain efforts to tackle the debt burden. The ranking is Aa2, the company’s third highest. Standard & Poor’s cut its grade in January to fourth highest. 

Stocks already began to respond to the quake, with the Nikkei 225 (NKY) Stock Average tumbling 1.7 percent by the close March 11, which came 14 minutes after the 2:46 p.m. strike of the main earthquake, which has been followed by scores of aftershocks.

Refinery Fire

Companies from Sony Corp., Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co. to beermaker Sapporo Holdings Ltd. and refiner JX Nippon Oil & Energy Corp. shut down facilities in northern Japan. Cosmo Oil Co. suffered a fire at a refinery in Chiba, outside Tokyo, while Tokyo Electric Power Co. battled to avert a meltdown to a nuclear power station 220 kilometers north of Tokyo after cooling systems failed. 

The devastation has caused the death of at least 500 people, with more than 700 people reported missing as of the afternoon March 12. Kan, returning from an inspection of the devastated area around Sendai said he would mobilize 50,000 Self Defense Force personnel to aid the relief effort. 

In Tokyo, residents emptied supermarket shelves and steeled themselves for a potential power outage flagged by Tokyo Electric Power. 

“The quake and the tsunami are a tragic devastation, but they will have only minimal impact on the Japanese economy overall,” said Michael Boskin, a Stanford University economics professor in Stanford, California, and former head of the White House Council of Economic Advisers. “When there are natural disasters, there’s a big disruption of capital and, tragically, life as well that will require capital to rebuild and so on. But it’s not widespread enough to disrupt” GDP very much, he said.

GDP Call

JPMorgan Chase & Co. for now maintained its projection for 2.2 percent annualized gains in GDP for the first and second quarters of 2011, in a March 11 research note. 

Provided the danger to the nuclear reactor is defused, “something several magnitudes lower than the 1.9 percent GDP impact” of the January 1995 Kobe earthquake is likely, London- based ING Financial Markets analysts Rob Carnell and Tom Levinson wrote in a note. “One potential fly in the ointment, is that in 1995, although seriously challenged, Japan’s fiscal situation was not in such a parlous state as it is today.” 

For its part, the Bank of Japan pledged to ensure financial stability, setting up an emergency task force and saying it will do everything to provide liquidity. Meantime, the Ministry of Finance may be prompted to intervene in the foreign exchange market should the nation’s currency climb and risk worsening deflationary pressures and undermining export competitiveness, analysts said.

Intervention Risk

The yen advanced 1.4 percent to 81.84 per dollar March 11, bringing its appreciation over the past year to about 10 percent. The yen typically climbs during crises because Japan’s current-account surplus means it doesn’t need foreign funding and because of the likelihood of Japanese investors repatriating assets. Japan holds $882.3 billion of Treasuries, the highest tally after China, according to the U.S. Treasury. 

“Insurance companies are unlikely to buy overseas assets aggressively while they worry about pending claims” stemming from the earthquake, Mansoor Mohi-uddin, the head of global currency strategy at UBS AG who was in Tokyo for visits with clients and present for the earthquake, wrote in a note. He predicted that the yen won’t strengthen past 80, citing the likelihood of authorities selling the currency to stem gains. 

The earthquake hit at a point when the economy was pulling out of a contraction in the fourth quarter. Recent data showed factory orders increased 4.2 percent from December, the biggest jump in five months, industrial production rose in January and the unemployment rate held that month at 4.9 percent, matching the lowest level since March 2009.

Legacy of Debt

Japan’s borrowing burden is a legacy of economic stagnation following the bursting of its stock and property bubble in 1990. Financial-industry bailouts and repeated attempts to revive growth through fiscal stimulus contributed. The debt is set to reach 210 percent of GDP in 2012, the highest among countries tracked by the Organization for Economic Cooperation and Development, compared with an estimated 101 percent for the U.S. 

One potential positive from the earthquake is the chance to revive a less-populated area of the nation. Provincial regions outside of Tokyo have borne the brunt of the decline in Japan’s population since 2006. The prefectures of Akita and Aomori, within Tohoku, have had the biggest decline in residents in the five years through 2010. Miyagi, where Sendai is located, accounts for 1.7 percent of the nation’s people, according to economist Richard Jerram at Macquarie Securities Ltd. 

“This is a Keynesian stimulus program that nobody can argue with: just rebuilding the city of Sendai,” said Marcus Noland, deputy director of the Peterson Institute for International Economics in Washington, co-author of the 2001 book “No More Bashing: Building a New Japan-United States Economic Relationship.” “Rebuilding Sendai could actually be an opportunity to try to create a growth pole in northern Japan.” 

Source: Bloomberg By Christopher Anstey 

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U.K. Pound Falls Against Dollar After BOE Holds Key Rate at a Record Low

The pound fell to its weakest level this month against the dollar as the Bank of England kept interest rates at a record low to safeguard the economy even with inflation at twice its target.

Sterling has declined in five of the past six trading days against its American counterpart. Officials held the main rate at 0.5 percent, as predicted by all 61 economists surveyed by Bloomberg News. The bank’s decision to maintain its bond holdings at 200 billion pounds ($323 billion) was also anticipated by economists in a separate survey. U.K. gilts rose as investors reduced bets on higher rates and declines in equities boosted demand for safer assets.

“There might have been some pricing of a move, so obviously when it didn’t happen sterling weakened slightly,” said Steven Barrow, London-based head of research for Group-of- 10 currencies at Standard Bank Plc. “The economy remains somewhat fragile, and that’s going to weigh on sterling.”

The pound depreciated 0.7 percent to $1.6085 at 2:07 p.m. in London, after weakening to $1.6064, the lowest level since Feb. 25. It was little changed at 85.90 pence per euro. Prior to today, the pound had gained 3.8 percent against the dollar this year amid mounting pressure on policy makers to raise the key rate as inflation persists above their 2 percent target. Inflation accelerated to 4 percent in January.

‘Futile Gesture’

Policy makers are seeking to balance their mandate to curb price increases with the danger of the economy slipping back into a recession after output shrank 0.6 percent in the fourth quarter. Bank of England Governor Mervyn King said this month that raising rates too soon would be a “futile gesture.”

Details of policy makers’ deliberations will be released on March 23, when minutes of the meeting that ended today are published. The government’s statistics office is scheduled to release February’s inflation data a day earlier. Three of the nine-member Monetary Policy Committee voted to raise the benchmark-interest rate to tame inflation at last month’s meeting.

Short-sterling contracts climbed, pushing the implied yield on the contract maturing in June down one basis point to 1.08 percent, as investors pared bets that borrowing costs will rise. The Bank of England hasn’t adjusted rates since March 2009.

Gains in government bonds pushed the 10-year gilt yield five basis points lower to 3.61 percent. The 4.75 percent security due March 2020 rose 0.420, or 4.2 pounds per 1,000- pound face amount, to 108.69. 

Source: Bloomberg By Lukanyo Mnyanda and Emma Charlton 

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Consumer Comfort in U.S. Drops to One-Month Low on Fuel

Consumer confidence fell last week to the lowest level in a month as surging gasoline prices soured Americans’ outlook about their finances and the economy. 

The Bloomberg Consumer Comfort Index dropped to minus 44.5 in the period to March 6, from the prior week’s minus 39.7, which was close to the highest in almost three years. Sentiment suffered the most among respondents who lacked a full-time job or any employment and those earning less than $50,000 a year. 

Gasoline costs have increased every day except one since mid-February, dealing a financial blow to households just as the labor market shows signs of improvement. The added burden of higher prices at the pump may restrain the gains in consumer spending that are bolstering the expansion. 

“Rising gasoline prices extracted a toll,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Those at the lower end of the income ladder and those in the middle are being squeezed by rising costs of fuel and food, which does not bode well for discretionary spending.” 

A Labor Department report today showed claims for unemployment benefits increased last week from an almost three- year low. Applications rose by 26,000 to 397,000 in the week ended March 5. Economists projected claims would climb to 376,000, according to the median forecast in a Bloomberg survey. 

The Bloomberg comfort gauge reflected worsening results for all three sub components. 

The measure of personal finances fell to minus 3.7 last week, from an almost two-year high of 2.4, the report showed. Forty-eight percent of those polled held positive views on their financial situation, down from 51 percent the previous week.

Views on Economy

A gauge of Americans’ views of the economy fell to minus 76.8 last week from minus 70.6. The share of households with a positive view of the economy dropped to 12 percent from 15 percent the prior week. 

An index of the buying climate fell to minus 53, the lowest in a year, from minus 50.9. Those people saying it was a good time to buy needed items dropped to 24 percent from 25 percent the previous week. 

The average price of regular gasoline at the pump climbed 14 cents to $3.51 a gallon in the week ended March 6, according to AAA, the nation’s biggest motoring organization. That followed a gain of 20 cents in the prior period, which was the biggest one-week jump since the aftermath of Hurricane Katrina in 2005.

‘Forking Over $50’

“The repeated impact of forking over $50 or more per fill- up is not to be underestimated,” Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement. “Gas is not the only culprit,” he said, citing the average duration of unemployment, which rose in February to the highest level in records going back to 1948. 

Gasoline prices and the comfort index have shown a strong inverse correlation since 2004, according to calculations by Bloomberg’s Brusuelas. Additionally, changes in the four-week average of claims for jobless benefits have been in sync with the comfort gauge about 72 percent of the time. 

Macy’s Inc. (M), the second-biggest U.S. department-store chain, is among companies watching the rising cost of fuel, which “will certainly affect some more than others,” said Chief Executive Officer Terry Lundgren. The shopper with less discretionary income “makes a decision of filling up (their) gas tank or buying a handbag,” he said. 

Spending Less 

“The customer who has the average household income of $75,000, $100,000, is back spending,” Lundgren said in the Cincinnati-based company’s March 9 presentation to investors. “And the customer who is well under that is spending even less than they spent before.” 

Today’s report showed the index for Americans earning $40,000 to $49,900 a year fell to minus 51.5 last week, from minus 42.6 the week before. 

The comfort measure for part-time workers declined to minus 52.5 from minus 42.9, while for those who are unemployed it dropped to minus 56.6 from minus 54.3. 

Federal Reserve Chairman Ben S. Bernanke, in his semiannual testimony before Congress last week, said sustained rises in the prices of oil or other commodities “would represent a threat both to economic growth and to overall price stability.” 

The Bloomberg Consumer Comfort Index is based on responses to telephone interviews with a random sample of 1,000 consumers aged 18 and over. Each week, 250 respondents are asked for their views on the economy, personal finances and buying climate; the percentage of negative responses is subtracted from the share of positive views and divided by three. 

The comfort index can range from 100, indicating every participant in the survey had a positive response to all three components, to minus 100, signaling all views were negative. The margin of error for the headline reading is 3 percentage points. 

The responses are broken down by participants’ sex, age, income level, race, region of residence, political affiliation, marital and employment status. 

Field work for the index is done by SSRS/Social Science Research Solutions in Media, Pennsylvania. 

Source: Bloomberg By Shobhana Chandra 

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U.S. Consumer Confidence Nosedives On Oil Woes

The IBD/TIPP Economic Optimism Index precipitously declined 7.9 points, or 15.5%, in March posting 43.0 vs. 50.9 in February. The index is 3.7 points below its 12-month average of 46.7 and 1.4 points below its reading of 44.4 in December 2007 when the economy entered into the recession, and 7.6 points below its all-time average of 50.6. The 7.9 points drop is the second biggest month-to-month decline in the index's ten-year history --1.8 points shy of its earlier record of 9.7 points in September 2005 in the aftermath of Hurricane Katrina. The previous low for the index was 41.1 in October 2008 during the sub-prime turmoil 29 months ago.

Note: Index readings above 50 indicate optimism; below 50 indicate pessimism.

The IBD/TIPP Economic Optimism Index has a good track record of foreshadowing the confidence indicators put out later each month by the University of Michigan and The Conference Board. IBD/TIPP conducted the national poll of 917 adults from February 28 to March 6. The margin of error is +/-3.3 percentage points.

The IBD/TIPP Economic Optimism Index has three key components, all of which declined in March.

• The Six-Month Economic Outlook, a measure of how consumers feel about the economy's prospects in the next six months, dropped 13.3 points, or 25.1%, to 39.7. When compared to December 2007, the index shows a gain of 7.6 points.

• The Personal Financial Outlook, a measure of how Americans feel about their own finances in the next six months, declined 5.9 points, or 10.5%, to reach 50.2.

• Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, fell 4.5 points, or 10.3%, to reach 39.0.

"Consumer confidence nosedived in March virtually erasing out its January gains. Uncertainties with the middle-east situation are the primary reason. Two-thirds say they are affected by the escalation of gasoline prices. The job situation is also a contributing factor. Twenty-three percent of households mention that at least one member is looking for full-time employment. The realities of the situation are grimmer than the picture portrayed by last week's job report," said Raghavan Mayur, president of TIPP, a unit of TechnoMetrica Market Intelligence, IBD's polling partner.

"Obviously, the 33-cent a gallon surge in gasoline prices in just two weeks is hitting average Americans hard, cutting sharply into their disposable income," said Terry Jones, associate editor of Investor's Business Daily. "Until energy prices reverse or stabilize, consumer confidence is likely to remain weak – and perhaps decline even further."

The Breakdown

This month, only three of the 21 demographic groups that IBD/TIPP tracks were above 50 on the Economic Optimism Index. Twenty groups declined on the index.

On the Economic Outlook component, only three of the groups IBD/TIPP tracks scored in optimistic territory. Twenty groups declined.

On the Personal Financial component, eleven of the groups IBD/TIPP tracks scored in optimistic territory. Two groups advanced on the component and nineteen declined.

On the Federal Policies component, only two of the 21 demographic groups tracked were above 50. All the twenty-one groups declined in March.

* * *

ABOUT THE IBD/TIPP POLL

The IBD/TIPP Economic Optimism Index is the earliest take on consumer confidence each month and predicts with 80% reliability monthly changes in sentiment in well-known polls by The Conference Board and the University of Michigan. The IBD/TIPP Economic Optimism Index is based on a survey of 900-plus adults chosen at random nationwide. The poll is generally conducted in the first week of the month.

For more information, go to www.tipponline.com

ABOUT INVESTOR'S BUSINESS DAILY (IBD)

Founded in 1984, Investor's Business Daily helps new and seasoned investors safely build financial security.

Using the proprietary CAN SLIM® Investing System and time-tested signals based on a landmark study of over 130 years of market history, IBD provides alerts to emerging high-growth stocks and major changes in market direction. Created by legendary investor and IBD founder William J. O'Neil, the CAN SLIM System has been the #1 growth strategy from 1998 – 2010, gaining 2,487.3% vs. 29.6% for the S&P 500 in an independent, real-time study by the American Association of Individual Investors.*

Investors of all levels use IBD's flagship newspaper (print and digital editions) and award-winning website, Investors.com, to spot early market trends, screen for winning stocks and get extensive, step-by-step training. IBD also offers investment workshops across the country, and provides both subscribers and non-subscribers with a free year-long investing course through the IBD Meetup program – America's largest network of Meetup.com investing groups. In partnership with TechnoMetrica, IBD also conducts IBD/TIPP polls, including the nationally-recognized IBD/TIPP Economic Optimism Index. IBD/TIPP was the most accurate pollster in both the 2008 and 2004 presidential elections, according to final FEC-certified results of those elections. IBD is also recognized for its political and economic commentary and is home to editorial cartoonist Michael Ramirez, winner of the 2008 and 1994 Pulitzer Prize.

*The American Association of Individual Investors' independent "real time" study of over 50 leading strategies found IBD's CAN SLIM Investment System achieved +2487.3% vs. S&P 500 +29.6% for the past 13 years (January 1998 through December 31 2010, AAII Stock Screen).

IBD/TIPP Poll © 2011 Investor's Business Daily Inc. and TechnoMetrica Inc.

Investor's Business Daily, IBD, and CAN SLIM and their corresponding logos are registered trademarks of Investor's Business Daily, Inc. © 2000-2011 Investor's Business Daily, Inc. All rights 

reserved.

Source: by IBD/TIPP Press-release 

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Australia's Retailers Face `Modest Recovery' as Higher Rates Offset Wages

Australian retail sales are likely to increase at a slower pace than past recoveries as higher interest rates erode consumer spending power, Access Economics said in a report today. 

Retail sales will advance 1.6 percent in the 12 months ending June 30, the Canberra-based research company said. Sales will gain 2.9 percent in 2011-12 and 3 percent in 2012-13, based on job growth, higher wages and a gradual easing of consumer caution, Access said. 

“This still looks set to be a more modest recovery in retail spending than is typically the case when employment is running hot,” the company, founded by two former Treasury economists, said in the report. Retail sales grew an average of 3.1 percent in the past five years, it said. 

Australian retail sales declined last quarter and Myer Holdings Ltd., the nation’s largest department store chain, last month cut its profit forecast for the 2011 financial year. Reserve Bank of Australia Governor Glenn Stevens left the overnight cash rate target at 4.75 percent last week, after seven increases from October 2009 to November 2010. 

Australian employers probably added 20,000 workers last month and the jobless rate stayed at 5 percent, according to the median estimate in a Bloomberg News survey of 19 economists ahead of a March 10 employment report. 

Australia recorded its biggest annual gain in employment on record in 2010 as resource and energy companies boosted hiring to meet demand from China in what the RBA has called a once-in- a-century mining boom. Retail sales, adjusted to remove inflation, fell 0.3 percent in the three months through Dec. 31 from the previous quarter, a report showed last month. 

“One can’t ignore the recent surge in Australia’s income,” Access said. “We suspect that over time, very low rates of unemployment should help to loosen the purse strings of consumers.” 

Source: Bloomberg By Michael Heath  

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Summary Of 5 Major Currency Indicators

On 28 until 4 of march, there were so many fundamental factors which give big influence of currency mover especially for 5 major currency. A long these weeks, some of indicators like EUR,JPY,AUD,CHF toward USD will be summarized below (to look more detail please refer to Forexfactory:

• EUR/USD, indicators such as Core Cosumer Price Index dropped from forecast (1.2%) to actual (1.1%), Unemployment rate was good result from (10%) to (9%), Produces Price Index raised from (1.1%) to (1.5%), German Retail Sales m/m was also up from (0.3%) to (1.4%), Minimum Bid rate was remain unchanged still (1%).

• USD/JPY, indicators such as Manufacturing Purchasing managers' index was good from (51.4%) to (52.9%), Retail sales y/y grow from (-2.1%) to (0,1%), Average Cash Earnings y/y dropped from forecast (0.4%) to actual (0.2%), Monetary Base y/y was also bad result from forecast (6,4%) to actual (5,6%), Capital Spending q/y plunged from 5,9% (forecast) to 3,8% (actual).

• USD/CHF, indicators such as GDP q/q was good result from (0,8%) to (0,9%), SVME PMI measures of Level of a diffusion index based on surveyed purchasing managers showed a good from 60,8 to 61,4, Retail Sales y/y was bad from forecast (1,7%) to actual (-2,6%).

• AUD/USD, indicators such as Company Operating Profit q/q was beyond prediction from (0,8%) to (-2,8%), Retail Sales m/m showed good result from 0,2% to 0,4%, Current Account dropped from forecast (-6,9B) to (-7,3B), Cash Rate was stable in 4,75%, GDP q/q grow from (0,1%) to (0,7%), Building Approvals m/m dropped from (10%) to (-15,9%), Trade Balance was good from forecast (1,53B) to (1,88B).

• GBP/USD, indicators such as NationWide HPI m/m was good result from (-0,2%) to (0,3%), Manufacturing PMI was remain unchanged in (61,5),Final Mortgage Approvals and M4 Money Supply m/m raised gradually compare with previous result, Construction PMI was going up from (53,0) to (56,5), Service PMI was bad from previous (54,5) to (52,6), Halifax HPI m/m dropped from previous (-0,6%) to actual (-0,9%).

In Summary, EUR and GBP were raised significantly along these weeks. Meanwhile, JPY, CHF, AUD were strangling up and down depend on what kind of indicators involved.   

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Retail Sales in U.S. Probably Climbed in February as Auto Purchases Rose

U.S. retail sales probably climbed in February by the most in four months, spurred by job growth and more seasonable temperatures, economists said before a report this week. 

The projected 1 percent gain would follow a 0.3 percent January increase, according to the median forecast of 63 economists surveyed by Bloomberg News ahead of Commerce Department figures March 11. Other reports may show the trade deficit widened in January and consumer confidence fell this month as gasoline prices rose. 

J.C. Penney and Macy’s Inc. (M) were among retailers that topped analysts’ sales estimates, a sign household spending regained momentum after a weather-restrained January. While higher fuel costs may be concerning Americans, bigger paychecks thanks to the tax compromise reached by President Barack Obama and congressional Republicans are probably preventing demand from slipping for now. 

“Chain-store sales did well, automobile sales improved sharply and employment bounced back” last month, said Brian Bethune, chief U.S. financial economist at IHS Global Insight in Lexington, Massachusetts. “Households may have realized that they have some extra cash in their pockets due to this year’s cut in the payroll tax.” 

Retail sales excluding automobiles and service stations rose 0.4 percent in February, the most in three months and twice the January gain, according to the Bloomberg survey.

First-Quarter Slowdown

While February sales improved from a month earlier, the retail figures aren’t adjusted for changes in prices, in contrast to the consumer spending numbers in the Commerce Department’s report on gross domestic product. Combined with January, the February retail sales figures indicate first- quarter household purchases will cool from a 4.1 percent pace in the previous three months that were the fastest since 2006. 

The retail sales data may reflect higher gasoline prices. Regular fuel in February reached an average $3.18 a gallon, or 8 cents more than January, according to AAA, the nation’s biggest motoring organization. 

Sales at stores open at least a year at the more than 30 chains tracked by Retail Metrics climbed 4.3 percent in February from a year earlier, an 18th straight gain, surpassing analysts’ estimates for a 3.8 percent increase. Purchases at stores open at least a year climbed 6.4 percent at Plano, Texas-based J.C. Penney, and 5.8 percent at New York-based Macy’s, company data showed last week.

Retailer Shares

Investors have driven up retailer shares as spending increases. The Standard & Poor’s Supercomposite Retailing Index, which includes Macy’s and Gap, has gained 21 percent in the 12 months through March 4, compared with an 18 percent advance for the broader S&P 500. 

Americans also filed into dealer showrooms in February to take advantage of incentives. Auto sales rose to a 13.38 million annual rate, the highest level since August 2009 when the government’s cash-for-clunkers program boosted purchases, according to industry data. 

“Growing consumer confidence combined with pent-up demand will continue to have a positive influence on industry sales going forward,” Donald R. Johnson, vice president for North American sales at Detroit-based General Motors Co., said in a March 1 teleconference. “We continue to believe that we’re going to see this slow-but-steady growth throughout the year.” 

An improving labor market is boosting spending. Employers added 192,000 jobs in February, the most since last May, and the unemployment rate fell to 8.9 percent, the lowest since April 2009, Labor Department figures showed last week. 

Beige Book 

The Federal Reserve last week said the labor market improved throughout the country early this year, driven by increasing retail sales and “solid growth” in manufacturing. 

“Retail spending strengthened compared with a year ago across all Districts except Richmond and Atlanta,” the Fed’s Beige Book of regional economies said. 

Another report from the Commerce Department on March 10 may show the trade deficit widened to $41.5 billion in January from $40.6 billion the prior month, according to the median forecast of economists surveyed by Bloomberg. The gain may reflect faster growth in imports, as wholesalers stocked shelves with goods made overseas to meet rising demand. 

Wholesale inventories probably climbed 0.9 percent in January following a 1 percent increase, economists forecast the Commerce Department will report on March 9. 

The Reuters/University of Michigan preliminary index of consumer confidence for March may show sentiment eased to 76.5 from 77.5 at the end of February, according to economists’ forecasts. That report is slated for March 11.

Bloomberg Survey

================================================================
                        Release    Period    Prior     Median
Indicator                 Date               Value    Forecast
================================================================
Cons. Credit $ Blns       3/7       Jan.      6.1       3.4
NFIB Optimism Index       3/8       Feb.      94.1      95.0
IBD/TIPP Conf. Index      3/8       Feb.      50.9      51.7
MBA Mortgage Applicatio   3/9      5-Mar     -6.5%      n/a
Whlsale Inv. MOM%         3/9       Jan.      1.0%      0.9%
Trade Balance $ Blns      3/10      Jan.     -40.6     -41.5
Initial Claims ,000’s     3/10     5-Mar      368       378
Cont. Claims ,000’s       3/10     26-Feb     3774      3750
BCCI                      3/10     6-Mar      -39       n/a
Federal Budget $ Blns     3/10      Feb.     -220.9    -227.5
Retail Sales MOM%         3/11      Feb.      0.3%      1.0%
Retail ex-autos MOM%      3/11      Feb.      0.3%      0.7%
Retail exauto/gas MOM%    3/11      Feb.      0.2%      0.4%
U of Mich Conf. Index     3/11    March P     77.5      76.5
Business Inv. MOM%        3/11      Jan.      0.8%      0.8%
================================================================

Source: Bloomberg By Bob Willis

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U.S. Commodities: Gold Falls From Record as Libya Concerns Ebb

Gold futures fell the most in six weeks after Venezuela offered to mediate a resolution to the crisis in Libya. Silver had the biggest drop since late January. 

The Arab League said it is weighing an offer by Venezuelan President Hugo Chavez to mediate the civil conflict in Libya. Yesterday, gold rose to a record of $1,441 an ounce as turmoil in the Middle East, the world’s biggest oil-producing region, boosted demand for an investment haven. 

“Peace, if it happens, may be bearish for gold and silver,” said Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter. “It is time again to head to the sidelines in gold and precious metals.” 

In other markets, cotton rose for the fifth straight session after a report showed increased export demand from the U.S., the world’s largest shipper. Crude oil fell from a 29- month high. The UBS Bloomberg Constant Maturity Commodity Index advanced 0.3 percent to 1,788.22. Earlier, the gauge reached 1,791.25, extending a rally to a record. 

Gold futures for April delivery fell $21.30, or 1.5 percent, to settle at $1,416.40 on the Comex in New York, the biggest slide since Jan. 20. The metal has gained 24 percent in the past year. 

Silver futures for May delivery fell 50.8 cents, or 1.5 percent, to $34.327 an ounce, the biggest drop since Jan. 25. Yesterday, the metal reached $34.975, the highest since March 7, 1980. That year, the price climbed to a record of $50.35. The commodity has almost doubled in the past 12 months.

Cotton

Cotton for May delivery advanced 5.1 cents, or 2.5 percent, to settle at $2.057 a pound on ICE Futures U.S. in New York. Earlier, the price surged by the exchange limit of 7 cents. The most-active contract has jumped 16 percent in five sessions after falling 5.5 percent last week. 

U.S. sales surged 56 percent to 403,341 bales in the week ended Feb. 24 from a week earlier as shipments increased to China, Turkey and Bangladesh, the U.S. Department of Agriculture said today. Prices have more than doubled in the past 12 months as global supplies trailed demand. 

“China is busy trying to book as much cotton as it can,” said Mike Stevens, an independent trader in Mandeville, Louisiana. “These numbers are terrific and show how much demand was waiting for prices to dip.”

Crude Oil

Oil futures for April delivery slid 32 cents, or 0.3 percent, to $101.91 a barrel on the New York Mercantile Exchange. 

The Associated Press reported that Libyan army deserters secured oil facilities in the rebel-held port of Brega on the Gulf of Sidra. Forces loyal to Muammar Qaddafi briefly seized, then lost control of, Brega yesterday.

“There are people attempting to come up with some kind of compromise that would allow some kind of peace settlement, and that’s definitely a bearish sign,” said Michael Lynch, the president of Strategic Energy & Economic Research in Winchester, Massachusetts. The government’s failure to hold Brega “removed any thought that there would be any damage to the oil exports,” he said.

Commodities settled as follows:

April gold down $21.30 to $1,416.40 an ounce May silver down 50.8 cents to $34.327 an ounce April platinum down $26.30 to $1,833 an ounce June palladium down $7.85 to $814.80 an ounce 

Livestock: April live cattle up 2 cents to $1.142 a pound August feeder cattle up 0.875 cent to $1.344 a pound April lean hogs up 0.55 cent to 88.8 cents a pound 

Grains: May soybeans up 17.75 cents to $14.12 a bushel May corn up 15.25 cents to $7.3675 a bushel May wheat up 12.25 cents to $8.235 a bushel May rice up 0.085 cent to $14.10 per 100 pounds May oats up 4 cents to $3.94 a bushel 

Food and Fiber: May coffee up 5.2 cents to $2.7475 a pound May cocoa up $69 to $3,733 a metric ton May cotton up 5.1 cents to $2.057 a pound May sugar up 0.21 cent to 30.59 cents a pound May orange juice down 1.75 cents to $1.7455 a pound 

Energy: April crude oil down 32 cents to $101.91 a barrel April natural gas down 4 cents to $3.778 per million British thermal units April heating oil down 0.84 cent to $3.0493 a gallon April gasoline down 0.33 cent to $3.0262 a gallon 

Others: May copper down 0.8 cent to $4.49 a pound May lumber up $10 to $315.20 per 1,000 board feet 

Source: Bloomberg By Pham-Duy Nguyen 

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Dollar Falls Versus Most Peers Before Bernanke Speaks; Yen Drops on Growth

The dollar fell against most of its major counterparts on speculation Federal Reserve Chairman Ben S. Bernanke will tell a Senate panel economic stimulus will continue as bets rose that interest rates will go up elsewhere. 

The yen and Swiss franc slumped as investors sought higher- yielding assets. The euro gained versus the dollar as the European Commission raised its growth forecast and said inflation may stay above the European Central Bank’s limit for most of 2011. 

“It has become the market view that the ECB and Bank of England, and maybe the Bank of Canada, will raise rates before the Federal Reserve,” said Michael Woolfolk, senior currency strategist in New York at Bank of New York Mellon Corp., the world’s largest custodial bank, with more than $20 trillion in assets under administration. “The data and events this week will be focused on fine-tuning the path of interest rates.”

The dollar weakened 0.1 percent to $1.3825 per euro at 9:19 a.m. in New York, from $1.3806 yesterday. The shared currency rose 0.6 percent to 113.60 versus the yen, from 112.91. Japan’s currency lost 0.5 percent to 82.18 per dollar, and the franc fell 0.4 percent to 1.2879 per euro. 

The yen fell against all of its most traded counterparts. 

Futures on the Standard & Poor’s 500 Index due this month rose 0.3 percent before a report that economists said will show manufacturing expanded at the fastest in almost seven years.

Bernanke Testimony

Bernanke is scheduled to deliver a semiannual report on monetary policy at 10 a.m. New York time to the Senate Banking Committee and is due to testify to the House Financial Services Committee tomorrow. 

Gross domestic product in the euro region may increase 1.6 percent this year, above an earlier forecast of 1.5 percent growth, the Brussels-based commission said in a report published today. Inflation will average 2.2 percent, the agency forecast, up from a November estimate of 1.8 percent. Inflation in the 17- nation bloc quickened to 2.4 percent last month from 2.3 percent in January, the European Union’s statistics office in Luxembourg said today in a preliminary estimate. 

“For the past couple of days we’ve seen some broader-based dollar weakness, especially against the G-10 currencies,” said Amelia Bourdeau, a currency strategist in Stamford, Connecticut, at UBS AG. “People expect the Fed to hike rates later compared to others in the G-10.” 

The ECB has held its benchmark interest rate at 1 percent since May 2009.

Canadian Dollar

The Canadian dollar traded near the strongest level in more than three years as the Bank of Canada kept its benchmark interest rate at 1 percent and policy makers said they will carefully consider future increases in a recovery that is “slightly faster” than they forecast. 

The currency traded at 97.28 cents per U.S. dollar, down 0.1 percent, after touching 96.84 cents, the strongest since November 2007. 

The Swedish krona advanced 0.4 percent to 6.3014 against the dollar, after appreciating 1.6 percent yesterday. Versus the euro, it strengthened 0.3 percent to 8.7069. It has gained this year versus all of its 16 most-traded counterparts. 

Sweden’s gross domestic product expanded 1.2 percent in the fourth quarter from 2.1 percent in the prior three months, Stockholm-based Statistics Sweden said today on its website. That compares with a 1 percent median estimate in a Bloomberg survey of 17 economists. Annual growth was at 7.3 percent, the fastest pace in at least 15 years. 

The Institute for Supply Management’s U.S. manufacturing index rose to 61.0 in February, the highest since May 2004, economists in a Bloomberg survey forecast before today’s report.

Australian Dollar

Australia’s dollar gained for a third day against the Japanese currency, appreciating 0.4 percent to 83.65 yen as a government report showed retail sales gained 0.4 percent in January from a month earlier. That beat the 0.3 percent median forecast in a Bloomberg survey. 

Japan’s benchmark interest rate of as low as zero compares with Australia’s 4.75 percent rate attracting investors to the South Pacific nation’s higher-yielding assets. 

The euro completed a third monthly advance versus the dollar in February before the ECB holds its next policy meeting on March 3. ECB governing council member Mario Draghi said on Feb. 26 that inflation pressures are forcing policy makers to focus more on the timing of interest rate increases. 

Europe’s shared currency has risen 1.3 percent this year, while the dollar has lost 2.2 percent, according to Bloomberg Correlation-Weighted Currency Indexes, which track the currencies of 10 developed nations. The dollar dropped yesterday to the lowest since August 2008, according to the indexes. 

Source: Bloomberg By Allison Bennett and Lukanyo Mnyanda 

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