Commodity Currencies Drop on Speculation China Will Cool Growth; Yen Gains

The Australian and New Zealand dollars declined against most of their major peers as speculation that China will take more measures to cool growth dented demand for higher-yielding currencies. The U.S. currency and the yen strengthened as equity losses boosted demand for a refuge. Data showed China’s economic growth accelerated, adding to pressure for monetary tightening. The euro gained against the pound and the yen as statistics showed German producer prices climbed at the fastest pace in seven months. The dollar pared gains against the common currency before data that economists predict will show U.S. continuing jobless claims increased and home-sales growth slowed. 

“Today’s move away from risks appears to be linked with fears of further Chinese policy tightening,” said Jane Foley, a senior currency strategist at Rabobank International in London. “The risk-off environment threatens to pressure the commodities currencies.” Australia’s currency fell 0.5 percent to 99.57 U.S. cents as of 9:45 a.m. in London, after strengthening 1.2 percent over the previous three days. It depreciated against 13 of its 16 major counterparts as the MSCI Asia Pacific Index of shares fell 1.5 percent, ending a two-day gain. 

Europe’s Stoxx 600 index fell 0.3 percent today, following declines by Asian and U.S. equities. Chinese Growth The U.S. dollar rose 0.2 percent to 82.18 yen and was little changed against the euro at $1.3468. The euro was at 110.69 yen from 110.49 yen. The yen climbed 0.3 percent to 81.83 per Australian dollar.

China’s economic growth quickened to an annual rate of 9.8 percent in the fourth quarter, up from 9.6 percent in the prior three months, the statistics bureau said in Beijing. Consumer prices rose 4.6 percent in December from a year earlier, compared with 5.1 percent the previous month. 

The People’s Bank of China will increase the key one-year lending rate to 6.81 percent from 5.81 percent this year and let the yuan strengthen about 6 percent against the dollar, Nomura Holdings Inc. forecast this week. New Zealand’s dollar retreated from near the strongest this year. The government said consumer prices rose 2.3 percent in the fourth quarter from the previous three months, when they advanced 1.1 percent. Economists surveyed by Bloomberg forecast 2.4 percent growth. 

“It looks like a risk-off day and the U.S. dollar should rally across the board,” said Tim Kelleher, vice-president of institutional banking and markets in Auckland at Commonwealth Bank of Australia, the nation’s largest lender. “There’s no change in rate expectations in New Zealand, and the currency is drifting off.” New Zealand’s dollar slid to 76.41 U.S. cents from 76.88 cents yesterday, when it climbed 77.87 cents, the highest level since Dec. 31. 

Source:Bloomberg By Anchalee Worrachate 

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Australia's Dollar Trades Near Two-Week High on Chinese Growth Prospects

The Australian dollar rose for a third day to a two-week high on speculation a report tomorrow will show China’s economy expanded more than 9 percent, indicating steps to curb inflation aren’t derailing growth.

New Zealand’s currency reached its strongest in two weeks after Auckland-based Fonterra Cooperative Group Ltd., the world’s largest dairy exporter, said whole milk powder prices rose to a seven-month high. The two South Pacific currencies were also boosted as Asian stocks advanced and commodities rose yesterday, increasing demand for higher-yielding assets.

The China “number should give the markets confidence,” said Jim Vrondas, a manager at online foreign-exchange dealer OzForex Ltd. in Sydney. “The Chinese data should be relatively positive for the Aussie in the short term.” Australia’s currency rose to $1.0033 as of 1:48 p.m. in Sydney from 99.94 cents in New York yesterday, after earlier rising to $1.0036, the strongest level since Jan. 5. The currency was at 82.43 yen from 82.51 yen.

New Zealand’s dollar climbed 0.5 percent to 77.54 U.S. cents and earlier touched 77.58 cents, the highest since Jan. 3. The currency was at 63.70 yen from 63.73 yen. Chinese reports tomorrow will show inflation cooled to 4.6 percent in December from 5.1 percent, while the economy grew 9.4 percent in the fourth quarter bringing full-year growth to 10.2 percent, according to Bloomberg surveys.

‘Signs of Weakness’

The Shanghai Composite Index has fallen 3.2 percent this year amid concern China will extend monetary policy tightening to keep price pressures under control, risking slower growth. The central bank lifted reserve requirements for the fourth time in three months on Jan. 14. China may see “significantly lower, if more sustainable” growth in the next four years as its economy shifts from “export and investment-driven growth to a more balanced pattern,” Yu Yongding, former adviser to the Chinese central bank, wrote in the Financial Times. China must be prepared to make “short-term sacrifices,” such as asset price adjustments and job cuts to guarantee long-term stability, he wrote.

“Any signs of weakness in the Chinese numbers and a commodity currency like the Australian dollar will probably feel the effects more than others,” said Tim Waterer, a foreign-exchange dealer at CMC Markets in Sydney. Data that comes in “too low will have growth-impact concerns but too high will fuel interest-rate concerns -- so it’s a case of striking a happy median.” The Australian dollar weakened earlier after an industry report showed consumer confidence fell the most in seven months in January on concern about the economic impact of flooding in the state of Queensland. Westpac Banking Corp. and the Melbourne Institute said their sentiment index decreased 5.7 percent to 104.6 this month, according to a survey released today.

N.Z. Inflation

New Zealand’s currency was bolstered after Fonterra said prices for whole-milk powder for March delivery gained 1.5 percent, rising for a fourth straight auction. The currency may also be bought before a report tomorrow that economists said will show inflation accelerated. Consumer prices in New Zealand rose 2.4 percent in the fourth quarter from the previous three months, when they gained 1.1 percent, according to a Bloomberg News survey before the report. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 3.91 percent from 3.90 yesterday.

Australian bond futures fell, with the 10-year contract for March delivery at 94.37 on the Sydney Futures Exchange from 94.455 yesterday. The implied yield on the futures rose 8.5 basis points to 5.63 percent.

Source: Bloomber.By Candice Zachariahs

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Dollar Declines Toward Five-Week Low Before Housing Report; Won Advances

The dollar fell toward a five-week low against the euro on speculation a sluggish recovery in housing and labor markets will deter the Federal Reserve from raising interest rates. The U.S. currency dropped to the lowest in two weeks versus the yen before reports that economists said will show housing starts fell and continuing jobless claims increased. South Korea’s won advanced for a second day as the central bank said it may raise its forecast for economic growth. The yuan traded near a 17-year high against the dollar before Chinese President Hu Jintao meets with President Barack Obama today.

“Housing and employment have been lagging the pace of U.S. recovery,” said Morio Okayasu, chief analyst in Tokyo at FOREX.com Japan Co., a unit of the online currency trading firm Gain Capital in Bedminster, New Jersey. “Weaker-than-estimated housing data may put the dollar under selling pressure.” The dollar fell to $1.3439 per euro as of 1:27 p.m. in Tokyo from $1.3387 in New York yesterday, when it declined to $1.3466, the weakest since Dec. 14. The U.S. currency declined to 82.29 yen from 82.56 yen, after dropping to 82.13, the lowest since Jan. 5. The yen traded at 110.58 per euro from 110.52.

IntercontinentalExchange Inc.’s Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, fell to 78.600, the lowest since Nov. 22, before trading at 78.692.

Housing Starts

U.S. housing starts declined 0.9 percent to a 550,000 annual rate last month, according to a Bloomberg survey before today’s Commerce Department report. The number of people continuing to receive jobless benefits rose to 3.99 million in the week ended Jan. 8 from 3.88 million the previous week, another survey showed before the data tomorrow. The Federal Open Market Committee will keep interest rates unchanged at its next meeting on Jan. 25-26, according to all 87 economists surveyed by Bloomberg.

There’s a 60 percent chance U.S. policy makers will hold the benchmark where it is or lower it by December, according to futures on the Chicago Board of Trade. The probability was 40 percent a month ago. The rate has been at a range of zero to 0.25 percent since December 2008. U.S. Treasury Secretary Timothy F. Geithner said China should understand that the yuan currency is a “big issue.” Geithner, speaking in a radio interview broadcast yesterday, said a stronger yuan is in China’s interest and a rising currency would help the nation manage inflation.

‘Weaken the Dollar’

“The U.S. is expected to keep pushing China to strengthen its currency,” said Toshiya Yamauchi, a senior currency analyst in Tokyo at Ueda Harlow Ltd., which provides foreign-exchange margin-trading services. “It will likely weaken the dollar.” The yuan were at 6.5840 per dollar from 6.5829 yesterday, when it advanced to 6.5824, the strongest level since China unified official and market exchange rates at the end of 1993. The won gained as central bank Governor Kim Choong Soo said the Bank of Korea may upgrade its gross domestic product expansion estimate of 4.5 percent for this year.

The currency was also boosted as the Kospi stock index rose 0.7 percent after International Business Machines Corp. and Apple Inc. reported results that beat estimates. “The Korean won was strong in the offshore market so that continued into the spot this morning,” said Kim Sung Soon, a currency dealer at Industrial Bank of Korea in Seoul. The won rose 0.4 percent to 1,112.35 per dollar.

‘Negative Factors’

Demand for the euro was tempered on speculation European policy makers will delay efforts to provide more funds for debt- strapped countries. German Finance Minister Wolfgang Schaeuble said there is no urgent need to act, eyeing a late-March deadline to strengthen the 750 billion-euro ($1 trillion) rescue fund, hammer out a permanent anti-crisis tool and tighten fiscal rules for the euro area. European Union financial chiefs ended a two-day meeting in Brussels yesterday.

“The euro has been bought on expectations for rescue efforts, and it gets sold when officials can’t get their act together,” said Kazuya Yashiro, a currency analyst at Himawari Securities, Inc. in Tokyo. “Sentiment remains heavy on the euro due to the debt crisis, which produces only negative factors.” The euro has dropped 0.4 percent over the past month in a measure of the currencies of 10 developed nations, according to Bloomberg Correlation-Weighted Currency Indexes. The yen has lost 0.2 percent, while the dollar is down 2.5 percent.

Source: Bloomber.By Yoshiaki Nohara and Monami Yui

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Euro Weakens on Debt Crisis Concern as Finance Ministers Prepare to Meet

The euro fell against the dollar, snapping a five-day gain, on concern the region’s debt crisis will worsen even as European finance ministers meet today to hammer out a new strategy to stem the contagion. The single currency weakened against 15 of its 16 major counterparts after Bank of Japan Governor Masaaki Shirakawa said European financial markets remain unstable because of concern about the long-running crisis. Thailand’s baht dropped the most in a week on speculation the central bank will limit its appreciation to safeguard the economic recovery. Australia’s dollar declined toward a six-week low versus New Zealand’s on concern record flooding will curtail economic growth.

“The debt problem is not going to go away,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia, the nation’s largest lender. “I don’t think finance ministers will lead to a big overhaul of their financing facility. We have pretty hard conviction that the euro is still a sell.” The euro declined to $1.3340 as of 12:23 p.m. in Tokyo from $1.3388 in New York on Jan. 14, when it climbed to $1.3457, the highest level since Dec. 14. The single currency slid to 110.58 yen from 110.94 yen. The dollar traded 82.90 yen from 82.87 yen.

Greek Rating

Greece lost its last investment-grade ranking on Jan. 14 when Fitch Ratings cut its debt ranking one level to BB+, or junk. The reduction was foreshadowed last month and puts the rating at the same level as at Moody’s Investors Service and Standard & Poor’s. “Financial markets in Europe continue to be volatile because of concern about sovereign-debt risk,” Shirakawa said at a quarterly meeting of the BOJ’s branch managers today in Tokyo. At the same time, “global financial markets on the whole have maintained stability,” he said.

European finance chiefs commence work today on a new debt- crisis-fighting strategy with Germany easing its opposition to an expanded arsenal and Portugal saying it will get by without an aid package. Germany is seeking a March deadline for increasing the 440 billion-euro ($587 billion) rescue fund, drawing up a permanent aid facility and rewriting the euro- zone’s budget-deficit rules. Ireland’s banks are calling on the nation’s central bank for emergency loans as their collateral to borrow from the European Central Bank is low, the Telegraph reported, citing government data.

The latest data show Anglo Irish Bank Corp. and other lenders had borrowed 51 billion euros from the Irish central bank by the end of December, under a program listed in the balance sheet as “other assets,” the newspaper reported.

‘Unsafe Countries’

“What has to happen in Europe is that the richer, stronger countries will have to lend more to the unsafe countries,” said Nobel-prize winning economist Robert Mundell in a Bloomberg Television interview. “What’s very important is that most people think there’s going to be a restructuring in some of these countries.”

The euro also fell on speculation its 3.7 percent gain versus the dollar last week was excessive.

“Positions have been unwound a lot, and I find it hard for the euro to extend gains versus the dollar from here,” said Koji Fukaya, chief currency strategist in Tokyo at Credit Suisse Group AG. “The market has been focusing on the euro rather than on the dollar.” The euro has gained 1.9 percent over the past week in a measure of the currencies of 10 developed nations, according to Bloomberg Correlation-Weighted Currency Indexes. The yen has lost 1.6 percent, and the dollar is down 1.4 percent.

Baht Weakens

The Thai baht extended two weeks of losses after central bank Deputy Governor Atchana Waiquamdee said last week policy makers will consider imposing capital controls if inflows begin to hurt the economy.

Official data on Jan. 14 showed foreign-exchange reserves rose for a sixth week in the period ended Jan. 7, suggesting the monetary authority may have bought dollars.

“While the global economic picture remains uncertain, the authorities may not want to allow the baht’s appreciation,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo. “Concern about intervention is lingering in the market, encouraging some selling of the baht.” The baht dropped 0.4 percent to 30.58 per dollar, after sliding 1.6 percent over the past two weeks. Australia’s dollar fell for a third day versus New Zealand’s after flooding in the state of Queensland devastated homes, destroyed crops and closed mines in the past six weeks. Heavy rainfall moving south and overloading river systems is threatening more towns and may add to a bill already running into billions of dollars.

“The focus in Australia is still on the flooding and what that means for growth and inflation pressures,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “Last week’s marked loss in Aussie-kiwi may continue.” Australia’s dollar dropped to NZ$1.2853 from NZ$1.2906 last week, after earlier touching NZ$1.2840, the lowest since Dec. 2. The currency fell 0.1 percent to 98.78 U.S. cents.

Source: Bloomber By Yoshiaki Nohara and Ron Harui

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