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Dollar, Euro, Pound & Yen

00:15 Saturday 12 June, 2010

U.K. Deputy Prime Minister Nick Clegg said economic instability and low growth in the euro area pose the “greatest threat” to Britain’s economic recovery.

The coalition government is “utterly committed” to working with the European Union to rein in deficits and spur economic recovery, Clegg said in a speech in Madrid today.

“If we get the answer right, future generations will recognize we did the right thing to rescue Europe from the dark shadow of long-term economic difficulties,” Clegg said. “If we get it wrong, we will condemn our continent to years of social, political and economic difficulties. The stakes could not be higher. If we cannot work through this together we put the future of Europe at risk.”

The euro has fallen 17 percent against the dollar this year as a debt crisis ravaged the 16-member euro region, prompting the EU to craft a 750 billion-euro ($905 billion) rescue package and governments from Spain to Germany to slash budget costs.

00:10 Saturday 12 June, 2010

The pound fell against the dollar and the euro after U.K. manufacturing unexpectedly weakened in April, fueling concern the economic recovery will flounder as the government cuts spending to tame the budget deficit.

Sterling pared its first weekly gain since April against the dollar as another report showed the cost of goods at factory gates rose at a slower pace last month than economists predicted. Gilts rose.

“I’m still very skeptical about sterling, at least in the short term,” said Niels Christensen, a foreign-exchange strategist at Nordea Bank AB in Copenhagen. “I don’t think the economic recovery is that strong. The spending cuts from the new government are bound to slow the economy.”

The pound lost 0.6 percent to 82.93 pence per euro as of 2:28 p.m. in London, erasing its weekly advance. It was 1 percent lower versus the dollar, at $1.4574, leaving its weekly gain at 0.8 percent.

00:06 Saturday 12 June, 2010

Canada’s dollar fell for the first time in five days after a report showed sales at retailers in the U.S unexpectedly dropped in May, signaling slower growth in the country’s largest trading partner.

The currency, known as the loonie, headed for its best weekly performance since October 2009 on bets economic growth will fuel demand for the nation’s raw materials and as investors sought currencies backed by relatively strong balance sheets.

“We have a lousy number out of the U.S., people may head toward risk aversion,” said John Curran, a Toronto-based senior vice president at CanadianForex Ltd., an online foreign-exchange dealer. “People are definitely still feeling comfortable about the strength of the Canadian economy. Against the G-20 currencies Canada is doing extremely well.”

The Canadian currency declined 0.7 percent to C$1.0365 per U.S. dollar at 9:25 a.m. in Toronto, compared with C$1.0297 yesterday, when it reached C$1.0288, the strongest since May 18. One Canadian dollar buys 97 U.S. cents. For the week the loonie has risen 2.5 percent, the biggest gain since the five days ended Oct. 9, 2009.

00:01 Saturday 12 June, 2010

The world’s biggest expected swings in foreign-exchange markets and the euro’s record depreciation are prompting Asian exporters to seek currency controls.

TLtek Co., a South Korean exporter of auto-part making machines, called on policy makers to limit volatility caused by “gambling” on the won. Kuala Lumpur-based Sime Darby Bhd., the world’s biggest listed palm-oil producer, needs to revise its business plan to account for the euro’s 19 percent drop against the ringgit this year. Taipei-based Maestro Innovations Corp., which makes infrared lamps for muscle pain, said curbs on the Taiwan dollar and China’s yuan would support orders.

Policy makers in South Korea, Taiwan and China are responding to Europe’s debt crisis by selling their own currencies, limiting investment inflows and delaying interest- rate increases. Goldman Sachs Group Inc. slashed its three-month Indian rupee forecast by 7 percent yesterday, Westpac Banking Corp. cut its year-end estimate for the won by 8 percent and ING Groep NV said the yuan won’t be revalued for a year.

“With the euro plunging, some central banks seem to be quite aggressive in stemming gains in their currencies,” said Kenichiro Ikezawa, who oversees about $3 billion as a fund manager at Daiwa SB Investments Ltd. in Tokyo and favors Brazilian and Australian debt over emerging-market Asian bonds. “China may delay revaluation and that, together with low yields in Asia, give little incentive to buy them.”

23:56 Friday 11 June, 2010

The dollar rose against the yen after an index of U.S. consumer sentiment climbed in June to the highest level in more than two years, fueling speculation the nation’s economy may be able to weather Europe’s debt crisis.

The greenback briefly reversed an earlier advance against the Japanese currency after an unexpected drop in U.S. retail sales raised concern consumer strength is ebbing. The yen fell against most of its major counterparts as stocks erased losses, boosting investor appetite for assets linked to growth. The Thomson Reuters/University of Michigan index of consumer sentiment increased to 75.5, the highest since January 2008.

“The Michigan sentiment number was better than expected,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. “That’s helped risk sentiment.”

The dollar gained 0.4 percent to 91.70 yen, from 91.34 yen yesterday, at 10:35 a.m. in New York. The greenback was little changed versus the euro at $1.2108, from $1.2124 yesterday. It earlier fell as much as 0.2 percent and rose 0.4 percent. The euro rose 0.3 percent to 111.09 yen, from 110.72 yen, gaining 1 percent for the week.

08:14 Friday 11 June, 2010

The pound may plummet toward $1.30, a level last reached in 1985 when Margaret Thatcher was prime minister, on concern the Bank of England will extend purchases of bonds, according to Bank of Tokyo-Mitsubishi UFJ Ltd.

“There are high risks that the Bank of England will be tempted to renew quantitative easing in the years ahead, prompting a further devaluation of the pound,” Lee Hardman, a London-based foreign-exchange strategist at Bank of Tokyo, wrote in a note today.

Sterling has dropped 9.3 percent this year on the prospects for Britain’s economy. The nation’s budget deficit has swollen to 11.1 percent of gross domestic product, the highest level since World War II.

The Bank of England, led by Governor Mervyn King, left the target for its bond holdings unchanged at 200 billion pounds ($292 billion) today. It also held its benchmark interest rate at a record low 0.5 percent as Prime Minister David Cameron prepares the biggest budget cuts since at least the early 1980s.

The central bank is maintaining bond buying, a policy known as quantitative easing, even as inflation exceeds the government’s 3 percent upper limit.

08:12 Friday 11 June, 2010

The euro may drop to $1.10 by year- end under a best-case scenario as the European Union’s efforts to contain the region’s debt crisis only postpone it, Royal Bank of Scotland Group Plc said.

The shared currency is likely to keep falling to $1.06 by mid-2011 “on the positive scenario,” in which Greek debt restructuring is deferred and the market gains confidence in the austerity plans of indebted nations on Europe’s periphery, Alan Ruskin, head of foreign-exchange strategy at RBS Securities, wrote in a note to clients today. Lower outcomes are possible, including a tumble below parity with the dollar, he said.

“The market correctly believes that the EU has done no more than buy time to put the periphery’s debt trajectory on a sustainable path, and then confront the unsustainable Greek solvency situation at a time when it is less likely to provoke contagion,” Stamford, Connecticut-based Ruskin wrote. “Other darker scenarios, like contagion stemming from a de facto Greek default, will make sub-parity levels inevitable.”

The euro traded at $1.2124 today after rising 1.2 percent as stocks climbed on speculation Europe’s debt crisis is unlikely to derail global growth.

08:09 Friday 11 June, 2010

Canada’s dollar rose to the strongest level in three weeks on optimism the global economic expansion will boost demand for commodity linked currencies and assets tied to growth.

The currency, known as the loonie, rose for a fourth day and has gained 11.4 percent this year, the best performance versus its developed-world counterparts, Bloomberg Correlation- Weighted Indices show. Canada had a merchandise trade surplus of C$175 million ($169 million) in April, compared with a deficit the prior month, Statistics Canada said today in Ottawa.

“The bias to be long Canada has held because the underlying domestic news is good,” said Jack Spitz, managing director of foreign exchange in Toronto at National Bank of Canada. “The Canadian dollar continues to be seen by many as a buy.”

The loonie climbed 1.4 percent to C$1.0306 per U.S. dollar at 4:44 p.m. in Toronto, compared with C$1.0445 yesterday. It touched C$1.0288, the strongest level since May 18. One Canadian dollar buys 97.03 U.S. cents. The last time the dollar rose for four consecutive days was in the period ended May 12.

08:05 Friday 11 June, 2010

Treasury Secretary Timothy F. Geithner said China’s exchange-rate policy prevents a balanced global recovery and called for a stronger yuan that would help officials fend off inflation in the world’s third-largest economy.

“The distortions caused by China’s exchange rate spread far beyond China’s borders and are an impediment to the global rebalancing we need,” Geithner said in testimony to the Senate Finance Committee today. A more flexible yuan would allow China to pursue “a more effective, independent monetary policy, which is particularly important now, with China’s economy facing a risk of inflation in goods and in asset prices.”

The U.S. has been trying to pressure China to allow the currency to strengthen, with Geithner resisting efforts at trade sanctions and hoping talks will lead to a higher yuan. China has kept the yuan pegged to the dollar during the financial crisis, fueling complaints from trading partners and U.S. lawmakers that the world’s biggest exporting nation has an unfair advantage in global commerce.

China’s economy is “fast on its way to becoming the world’s second-largest” after the U.S. and supplanting Japan, the current No. 2, Geithner said. “American firms operating in China should have the same rights enjoyed by Chinese companies, just as Chinese firms have in the United States. This is a simple principle of fairness.”

08:02 Friday 11 June, 2010

The euro gained the most against the dollar in two weeks as stocks climbed on speculation the European fiscal debt crisis is unlikely to derail global growth, fueling investor appetite for riskier assets.

Europe’s common currency also rallied after Germany’s top constitutional court rejected an emergency attempt to block the nation from granting aid guarantees and the European Central Bank’s president said its “temporary” bond purchases will continue. The dollar and yen fell after reports showed economic growth in Asia is accelerating, damping demand for the currencies as a haven.

“The markets appear to be responding to a combination of stabilization on the euro area and global growth fronts,” said Aroop Chatterjee, a currency strategist at Barclays Plc in New York. “The improved data allays some of the concerns over global growth prospects. The risky currencies are rallying and you’re seeing the euro recover somewhat.”

The euro gained 1.2 percent to $1.2124 at 5 p.m. in New York, from $1.1979 yesterday. The 16-nation currency appreciated as much as 1.4 percent, the most on an intraday basis since May 27. It touched $1.1877 on June 7, the weakest since March 2006.

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