09 Sep 2009
Sept. 9 (Bloomberg) -- The euro traded near a nine-month high against the dollar before a report forecast to show French industrial production rose for a third month in July, adding to evidence the region's economic recession is easing.
The dollar fell for a second day versus the pound on expectations Federal Reserve officials will today signal they plan to refrain from raising interest rates. The yen was close to a two-week low against New Zealand's dollar before a report from Tokyo this week forecast to show consumer confidence in the world's second-largest economy rose for an eighth month, sapping demand for the relative safety of Japan's currency.
"Risk appetite is coming back on the table, supporting the euro," said Susumu Kato, chief economist in Tokyo at Calyon Securities, the investment banking unit of Credit Agricole SA. "The euro is also benefiting from uncertainty about the U.S. economy. The euro-zone is likely to see a hike in interest rates before the U.S. does."
The euro traded at $1.4496 at 6:45 a.m. in London from $1.4478 in New York yesterday, when it reached $1.4535, the highest level since Dec. 18. The dollar was at 92.33 yen from 92.32 yen. The yen fetched 133.81 per euro from 133.67, after earlier reaching 134.17, the lowest level since Aug. 28.
The greenback rose to 86.00 cents per Australian dollar from 86.16 cents yesterday, when it touched 86.58 cents, the weakest since Aug. 29, 2008. New Zealand's dollar was at 64.25 yen from 64.26 yen. It reached 64.67 yen on Sept. 7, the strongest since Aug. 26.
‘Inflation Debate'
The euro may extend yesterday's gain as economists surveyed by Bloomberg News said the Paris-based statistics office Insee may report factory output in France gained 0.4 percent in July after rising 0.3 percent in June. The data is due tomorrow.
"Global growth indicators remain supportive for risk takers," analysts led by Hans-Guenter Redeker, London-based global head of currency strategy at BNP Paribas SA, wrote in a research note yesterday. "The dollar will remain under selling pressure."
Gains in the euro abated after Asian stocks declined, stoking speculation investors will reduce holdings of higher- yielding assets.
The MSCI Asia Pacific Index of regional shares slipped 0.9 percent and the Nikkei 225 Stock average fell 1.2 percent. The euro-yen had a correlation of 0.87 with the Nikkei 225 in the past year, according to data compiled by Bloomberg. A reading of 1 would mean the two moved in lockstep.
Fed Speeches
The dollar may weaken before speeches by Chicago Fed President Charles Evans and Dallas Fed President Richard Fisher today. Evans will speak on "The Great Inflation Debate" in New York and Fisher will speak on "Today's Economy: New Challenges for Business" in Dallas.
"They are going to talk about policies remaining accommodating in the near term," said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. in Sydney. "There are signs that things are improving, but we are not out of the woods yet. They are still going to be cautious."
Atlanta Fed President Dennis Lockhart will speak in Jacksonville, Florida, and Fed Vice Chairman Donald Kohn will speak in Washington tomorrow. Fisher said last week the U.S. may see "a prolonged period of sluggish economic performance."
The Dollar Index has fallen 1.4 percent over the past week as signs the global economy is starting to recover sapped demand for the greenback as a refuge from the recession.
U.K. industrial production rose for a second month in July, climbing 0.5 percent, the Office for National Statistics said in London yesterday. German exports increased for a third month in July, advancing 2.3 percent, as global trade picked up, the Federal Statistics Office said in Wiesbaden yesterday.
UBS Forecasts
The Dollar Index, which the ICE uses to track the dollar against the currencies of six major U.S. trading partners, was at 77.253 today from 77.333 yesterday, when it fell to 77.047, the lowest level since Sept. 29, 2008.
UBS AG, the world's second-largest currency trader, lowered its forecasts for the greenback, citing improving risk appetite and gains in stocks.
The dollar will weaken to $1.45 per euro in a month, compared with a previous forecast of $1.40, and it will fall to $1.63 per pound, versus an earlier prediction of $1.57, Mansoor Mohi-uddin, chief currency strategist at UBS in Zurich, wrote in a research note today.
The yen weakened against the Australian and New Zealand currencies as economists surveyed by Bloomberg News forecast consumer confidence in Japan climbed to 40.2 in August from 39.7 in July. The Cabinet Office is set to release the data on Sept. 11 in Tokyo.
Australian Dollar
"The global economic outlook is improving as the financial crisis abates, damping demand for the yen as a refuge," said Satoru Ogasawara, a foreign-exchange analyst and economist in Tokyo at Credit Suisse Group AG. "The yen is being sold due to Japan's low interest rates."
Benchmark interest rates are 0.1 percent in Japan and as low as zero in the U.S., compared with 3 percent in Australia and 2.5 percent in New Zealand. That makes the South Pacific nations' assets attractive to investors seeking higher returns.
Australia's dollar slipped from a one-year high against the greenback after government reports showed retail sales unexpectedly fell and home loans declined by more than economists had estimated.
Sales dropped 1 percent from June, when they declined a revised 0.8 percent, the Bureau of Statistics said in Sydney today. The median forecast of 20 economists surveyed by Bloomberg News was for a 0.5 percent gain. Australian home-loan approvals fell in July, ending a record nine months of consecutive gains, a separate report showed.
