June 3 (Bloomberg) -- Stocks rallied and U.S. index futures advanced on speculation economic reports will indicate the world’s biggest economy is gathering strength. The yen weakened and government bonds fell.
The MSCI World Index, a gauge of equities in 24 developed nations, climbed 1.1 percent at 9:05 a.m. in New York. Futures on the Standard & Poor’s 500 Index rose 0.4 percent, signaling the benchmark gauge may add to yesterday’s 2.6 percent surge. The yen slipped against all 16 of its most-traded counterparts and the dollar dropped against 13. French, Dutch and Australian 10-year notes led the decline in government bonds while the cost of protecting European corporate bonds from default sank.
U.S. service industries probably expanded in May at the fastest pace in four years while factory orders rose, according to Bloomberg surveys of economists, a day before the Labor Department’s monthly jobs report that is forecast to show payrolls climbed by the most since 1983. Reports this morning showed jobless claims decreased last week and private employers added jobs in May.
“Stocks should be rising,” said Philip Orlando, the New York-based chief equity market strategist at Federated Investors, which manages about $400 billion. “If we begin to get a continuation of positive economic news, investors will focus on fundamentals. We still have a 12-month target of 1,350 on the S&P 500 and that translates into a near-term target of 1,200 to 1,250.”
Improving Economic Data
U.S. benchmark equity indexes posted their third-biggest advances of 2010 yesterday as rising sales of U.S. homes and cars bolstered confidence in the global economy. Improving economic reports have boosted confidence after the MSCI World fell 12 percent from its April high on concern the European sovereign debt crisis will slow global growth.
Companies in the U.S. added 55,000 workers in May, according to data based on payrolls from ADP Employer Services. The increase was the fourth in a row and followed a revised 65,000 rise the prior month that was twice as much as initially estimated. Initial jobless claims fell by 10,000 last week to 453,000, according to the U.S. Labor Department.
The Institute for Supply Management’s index of non- manufacturing businesses, which covers almost 90 percent of the economy, rose to 55.6 from 55.4 in April, according to the median forecast of 76 economists surveyed by Bloomberg News. The report is due at 10 a.m. in New York. Factory orders are forecast to have increased 1.8 percent, according to a survey of economists before a 10 a.m. government report.
‘Upside’ Surprises
“The global economic recovery is continuing and most economic indicators are surprising to the upside,” said Tobias Merath, head of commodity research at Credit Suisse Group AG in Zurich. “The real economy is going rather well.”
Tomorrow’s Labor Department jobs report will show the U.S. economy added 515,000 jobs in May, the fifth straight month of gains, according to the median of 81 economists’ forecasts. The jump probably reflected a surge in government hiring of temporary help to conduct the census and a 175,000 increase in private employment.
More than 23 shares gained for each that fell on the benchmark Stoxx Europe 600 Index, which rallied 1.9 percent, while the MSCI Emerging Markets Index advanced 1.9 percent.
BP Plc, struggling to control its gushing oil well in the Gulf of Mexico, jumped 3.2 percent in London as investors speculated that the stock’s 30 percent plunge since April was overdone. The shares maintained gains even as Fitch Ratings cut its debt rating AA from AA+.
BHP Rallies
BHP Billiton Ltd., the world’s biggest mining company, increased 1.8 percent in London. Valeo SA, France’s second- largest auto-parts supplier, rallied 6.8 percent in Paris after giving a sales forecast.
The MSCI Asia Pacific Index jumped 2.6 percent, the biggest gain since February. Nissan Motor Co. climbed 4.8 percent in Tokyo after its U.S. sales surged 24 percent in May from a year earlier. Canon Inc., which gets 78 percent of its revenue outside Japan, rose 3.4 percent as a weaker yen boosted its earnings outlook.
Crude oil for July delivery added 0.6 percent to $73.26 a barrel in New York. Commodities also advanced after General Motors Co. and Ford Motor Co. posted U.S. sales increases in May that topped analysts’ estimates.
The yen depreciated 0.4 percent to a two-week low against the dollar and also lost 0.6 percent against the euro. So-called commodity currencies rose, with the Australian dollar advancing 0.7 percent against the U.S. currency. The euro strengthened 0.1 percent to $1.2264 after gaining as much as 0.6 percent.
Government bonds slipped, with the yield on German bunds, the benchmark European debt security, rising five basis points to 2.71 percent. The yield on the French 10-year note advanced eight basis points to 3.05 percent. The 10-year U.S. Treasury yield rose five basis points to 3.39 percent.
Thursday, June 3, 2010
Wednesday, June 2, 2010
Yen Near 2-Week Low on Japan Political Concern, U.S. Recovery
The yen traded near the lowest level in more than two weeks as political uncertainty in Japan and signs the U.S. economy is gaining traction tilted demand toward dollar-denominated assets.
The greenback also rose against Canada’s dollar and South Africa’s rand before reports forecast to show U.S. companies boosted payrolls while initial jobless claims fell. The yen slid on speculation Japan’s next leader will seek a weaker currency after Prime Minister Yukio Hatoyama’s resignation yesterday. Asian stocks extended a rebound in U.S. shares, boosting demand for higher-yielding currencies such as Australia’s dollar.
“U.S. economic data continue to show solid improvement and financial markets there are doing relatively well,” said Hiroshi Yanagisawa, a Tokyo-based dealer at FX Prime Corp., a foreign-exchange unit of Japanese trading house Itochu Corp. “Global money managers are more inclined to shift their money to the U.S.”
The Japanese currency was at 92.10 yen as of 9:54 a.m. in Tokyo from 92.13 in New York yesterday when it touched 92.36, the weakest level since May 18. The yen was at 112.99 per euro from 112.84 yesterday. The euro changed hands at $1.2269 from $1.2249 yesterday. It touched $1.2111 on June 1, the lowest level since April 2006.
South Africa’s rand fell to 7.6620 per dollar from 7.6603 yesterday. Canada’s currency slid to C$1.0393 per U.S. dollar from C$1.0383 yesterday.
U.S. companies created 70,000 jobs in May, according to a Bloomberg News survey of economists before the data’s release from ADP Employer Services today. Initial jobless claims fell to 455,000 in the five days ended May 29 from 460,000 in the previous week, a separate survey showed before today’s Commerce Department report.
Stocks Rebound
The Standard & Poor’s 500 Index climbed 2.6 percent, and the VIX index, a measure of market volatility known as Wall Street’s fear gauge, slid 15 percent yesterday, snapping a two- day advance as U.S. home sales topped forecasts.
The MSCI Asia Pacific Index of regional shares rose 1.5 percent today and the Nikkei 225 Stock Average added 2.2 percent.
“Once investors shift their attention back to the fundamentals, which are still signaling solid improvement, there is no strong reason to buy the yen,” 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. “Underlying demand for higher-yielding assets outside Japan remains strong.”
Japanese investors boosted net purchases of foreign bonds to the most since September in the week ended May 28, according to data released today by the Ministry of Finance in Tokyo.
Hatoyama Successor
The Japanese currency fell against most major counterparts yesterday on speculation Hatoyama will be succeeded by Finance Minister Naoto Kan, who has called for the Bank of Japan to do more to fight deflation.
On his first day as finance chief on Jan. 7, Kan said he wanted the Japanese currency to weaken “a bit more” after it declined from a 14-year high of 84.83 per dollar in November. A stronger yen erodes profits of exporters, who have been leading Japan’s recovery from its worst postwar recession. On May 20, Kan said he expects the Bank of Japan to support the economy with “flexible and appropriate” policy.
“Kan, or whoever the successor is, won’t try to talk up the value of the yen,” said Kazumasa Yamaoka, a senior analyst in Tokyo at GCI Capital Co., an investment advisory company. “The market is looking to see a weaker yen.”
Hatoyama’s resignation came less than two months before mid-term elections, potentially hindering the Democratic Party of Japan’s efforts to reduce public debt.
Kan said yesterday he plans to run for leadership of the governing Democratic Party of Japan and the DPJ will vote on the new party leader tomorrow.
The greenback also rose against Canada’s dollar and South Africa’s rand before reports forecast to show U.S. companies boosted payrolls while initial jobless claims fell. The yen slid on speculation Japan’s next leader will seek a weaker currency after Prime Minister Yukio Hatoyama’s resignation yesterday. Asian stocks extended a rebound in U.S. shares, boosting demand for higher-yielding currencies such as Australia’s dollar.
“U.S. economic data continue to show solid improvement and financial markets there are doing relatively well,” said Hiroshi Yanagisawa, a Tokyo-based dealer at FX Prime Corp., a foreign-exchange unit of Japanese trading house Itochu Corp. “Global money managers are more inclined to shift their money to the U.S.”
The Japanese currency was at 92.10 yen as of 9:54 a.m. in Tokyo from 92.13 in New York yesterday when it touched 92.36, the weakest level since May 18. The yen was at 112.99 per euro from 112.84 yesterday. The euro changed hands at $1.2269 from $1.2249 yesterday. It touched $1.2111 on June 1, the lowest level since April 2006.
South Africa’s rand fell to 7.6620 per dollar from 7.6603 yesterday. Canada’s currency slid to C$1.0393 per U.S. dollar from C$1.0383 yesterday.
U.S. companies created 70,000 jobs in May, according to a Bloomberg News survey of economists before the data’s release from ADP Employer Services today. Initial jobless claims fell to 455,000 in the five days ended May 29 from 460,000 in the previous week, a separate survey showed before today’s Commerce Department report.
Stocks Rebound
The Standard & Poor’s 500 Index climbed 2.6 percent, and the VIX index, a measure of market volatility known as Wall Street’s fear gauge, slid 15 percent yesterday, snapping a two- day advance as U.S. home sales topped forecasts.
The MSCI Asia Pacific Index of regional shares rose 1.5 percent today and the Nikkei 225 Stock Average added 2.2 percent.
“Once investors shift their attention back to the fundamentals, which are still signaling solid improvement, there is no strong reason to buy the yen,” 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. “Underlying demand for higher-yielding assets outside Japan remains strong.”
Japanese investors boosted net purchases of foreign bonds to the most since September in the week ended May 28, according to data released today by the Ministry of Finance in Tokyo.
Hatoyama Successor
The Japanese currency fell against most major counterparts yesterday on speculation Hatoyama will be succeeded by Finance Minister Naoto Kan, who has called for the Bank of Japan to do more to fight deflation.
On his first day as finance chief on Jan. 7, Kan said he wanted the Japanese currency to weaken “a bit more” after it declined from a 14-year high of 84.83 per dollar in November. A stronger yen erodes profits of exporters, who have been leading Japan’s recovery from its worst postwar recession. On May 20, Kan said he expects the Bank of Japan to support the economy with “flexible and appropriate” policy.
“Kan, or whoever the successor is, won’t try to talk up the value of the yen,” said Kazumasa Yamaoka, a senior analyst in Tokyo at GCI Capital Co., an investment advisory company. “The market is looking to see a weaker yen.”
Hatoyama’s resignation came less than two months before mid-term elections, potentially hindering the Democratic Party of Japan’s efforts to reduce public debt.
Kan said yesterday he plans to run for leadership of the governing Democratic Party of Japan and the DPJ will vote on the new party leader tomorrow.
Yen Weakens as Hatoyama Resigns; European Stocks, Gold Decline
une 2 (Bloomberg) -- The yen weakened after Japanese Prime Minister Yukio Hatoyama quit. Stocks declined in Europe, led by energy companies, while U.S. equity futures gained.
The yen fell against all but one of the 16 most-traded currencies tracked by Bloomberg at 8:48 a.m. in New York. The Stoxx Europe 600 Index lost 0.8 percent, with the 38-company oil and gas group dropping 1.9 percent as BP Plc fell 1.9 percent. The MSCI Asia Pacific Index slumped 1.1 percent and Standard & Poor’s 500 index futures expiring in June rose 0.3 percent. Copper fell and gold slid for the first time in eight days.
Japan’s Hatoyama said he’ll step down, less than two months before elections, raising concerns that the world’s second- largest economy will continue to sputter at the same time that China takes steps to cool growth and Europe struggles amid record deficits. The U.S. Justice Department yesterday said it’s investigating whether any criminal or civil laws were violated when a drilling rig leased by BP exploded in the Gulf of Mexico in April. The biggest oil spill in U.S. history may damage the prospects of other energy companies seeking to operate offshore.
Hatoyama’s resignation is “sending the yen lower across the board,” a team of strategists at Societe Generale SA led by London-based Vincent Chaigneau wrote in a report today. “The yen could remain under pressure in the very near term as political uncertainty remains elevated.”
The yen declined 1 percent versus the dollar and 0.7 percent against the euro. Europe’s single currency dropped 0.3 percent to $1.2195.
Stricter Regulations
The Nikkei 225 Stock Average dropped 1.1 percent as Sony Corp. sank 2.8 percent in Tokyo. Mitsui & Co., which owns a stake in a BP oil field in the Gulf of Mexico, slumped 8.3 percent amid concern about stricter regulations on companies operating in the region. Bank of China Ltd. tumbled 5.1 percent in Shanghai on speculation a convertible bond sale will dilute shareholders’ stakes.
BP slipped 1.9 percent in London, extending yesterday’s 13 percent slide that was the biggest since 1992. Petroleum Geo- Services ASA, which provides surveys of oil and gas fields, dropped 3.3 percent in Oslo. Prudential Plc slipped 2.5 percent as its attempt to cut the price of the $35.5 billion takeover of American International Group Inc.’s main Asian unit failed, leaving the biggest purchase in the U.K. insurer’s history on the verge of failure.
Home Sales
The gain in U.S. stock futures indicated the S&P 500 may pare some of yesterday’s 1.7 percent slump. A report from the National Association of Realtors due at 10 a.m. in Washington may show the number of contracts to purchase previously owned homes rose in April for a third consecutive month as buyers rushed to lock in a government tax credit. The index of pending- home purchases climbed 5 percent following a 5.3 percent gain a month earlier, according to the median forecast in a Bloomberg News survey of 40 economists.
Emerging-market stocks fell for a second day, the first back-to-back decline in two weeks. The MSCI Emerging Markets Index lost 0.4 percent, with commodity producers leading the retreat. Gold Fields Ltd. dropped 2.2 percent in Johannesburg.
Copper for delivery in three months declined 2.2 percent to $6,604 a metric ton on the London Metal Exchange. Aluminum, nickel and zinc also retreated. Gold for immediate delivery fell 0.6 percent to $1,218.25 an ounce in London. Crude oil for July delivery dropped 0.7 percent to $72.08 a barrel in New York.
To contact the reporter on this story: Stuart Wallace in London at
The yen fell against all but one of the 16 most-traded currencies tracked by Bloomberg at 8:48 a.m. in New York. The Stoxx Europe 600 Index lost 0.8 percent, with the 38-company oil and gas group dropping 1.9 percent as BP Plc fell 1.9 percent. The MSCI Asia Pacific Index slumped 1.1 percent and Standard & Poor’s 500 index futures expiring in June rose 0.3 percent. Copper fell and gold slid for the first time in eight days.
Japan’s Hatoyama said he’ll step down, less than two months before elections, raising concerns that the world’s second- largest economy will continue to sputter at the same time that China takes steps to cool growth and Europe struggles amid record deficits. The U.S. Justice Department yesterday said it’s investigating whether any criminal or civil laws were violated when a drilling rig leased by BP exploded in the Gulf of Mexico in April. The biggest oil spill in U.S. history may damage the prospects of other energy companies seeking to operate offshore.
Hatoyama’s resignation is “sending the yen lower across the board,” a team of strategists at Societe Generale SA led by London-based Vincent Chaigneau wrote in a report today. “The yen could remain under pressure in the very near term as political uncertainty remains elevated.”
The yen declined 1 percent versus the dollar and 0.7 percent against the euro. Europe’s single currency dropped 0.3 percent to $1.2195.
Stricter Regulations
The Nikkei 225 Stock Average dropped 1.1 percent as Sony Corp. sank 2.8 percent in Tokyo. Mitsui & Co., which owns a stake in a BP oil field in the Gulf of Mexico, slumped 8.3 percent amid concern about stricter regulations on companies operating in the region. Bank of China Ltd. tumbled 5.1 percent in Shanghai on speculation a convertible bond sale will dilute shareholders’ stakes.
BP slipped 1.9 percent in London, extending yesterday’s 13 percent slide that was the biggest since 1992. Petroleum Geo- Services ASA, which provides surveys of oil and gas fields, dropped 3.3 percent in Oslo. Prudential Plc slipped 2.5 percent as its attempt to cut the price of the $35.5 billion takeover of American International Group Inc.’s main Asian unit failed, leaving the biggest purchase in the U.K. insurer’s history on the verge of failure.
Home Sales
The gain in U.S. stock futures indicated the S&P 500 may pare some of yesterday’s 1.7 percent slump. A report from the National Association of Realtors due at 10 a.m. in Washington may show the number of contracts to purchase previously owned homes rose in April for a third consecutive month as buyers rushed to lock in a government tax credit. The index of pending- home purchases climbed 5 percent following a 5.3 percent gain a month earlier, according to the median forecast in a Bloomberg News survey of 40 economists.
Emerging-market stocks fell for a second day, the first back-to-back decline in two weeks. The MSCI Emerging Markets Index lost 0.4 percent, with commodity producers leading the retreat. Gold Fields Ltd. dropped 2.2 percent in Johannesburg.
Copper for delivery in three months declined 2.2 percent to $6,604 a metric ton on the London Metal Exchange. Aluminum, nickel and zinc also retreated. Gold for immediate delivery fell 0.6 percent to $1,218.25 an ounce in London. Crude oil for July delivery dropped 0.7 percent to $72.08 a barrel in New York.
To contact the reporter on this story: Stuart Wallace in London at
Tuesday, June 1, 2010
Euro Weakens on Concern Over Europe Spending Cuts, Bank Losses
une 1 (Bloomberg) -- The euro fell to a four-year low against the dollar on concern mounting writedowns at Europe’s banks and efforts to reduce budget deficits will hamper the region’s economic recovery.
The longest stretch of monthly decreases in 10 years has erased 50 percent of the euro’s rally from its October 2000 low to the July 2008 high. Canada’s dollar rose against 11 of its 16 most-traded counterparts today on speculation the central bank may become the first Group of Seven country to boost borrowing costs since last year’s recession. Europe’s currency pared its drop as stocks reduced their losses.
“There are some complications in the euro area which have stopped us from jumping in until the euro gets closer to what we see as a fair value,” said Gareth Fielding, chief investment strategist in Zug, Switzerland, at Quantum Global Wealth Management, which oversees $2.5 billion for sovereign-wealth funds and central banks. The euro’s “long-term fair value” is seen at $1.20, according to Fielding.
The euro fell as much as 1.6 percent to $1.2111, the lowest level since April 14, 2006, before trading at $1.2163 at 7:50 a.m. in New York, compared with $1.2306 yesterday. It declined 1.6 percent to 110.74 yen, from 112.31 yen. Japan’s currency strengthened 0.2 percent to 91.07 per dollar, from 91.26.
European unemployment unexpectedly rose in April, reaching a 12-year high as the region’s sovereign debt crisis undermined the outlook for the economy.
Europe’s Jobless Rate
The jobless rate in the 16-nation euro area increased to 10.1 percent, from 10 percent in March, the highest rate since June 1998, the European Union’s statistics office in Luxembourg said today. Economists had forecast that the rate would remain unchanged in April, according to the median forecast of 26 economists in a Bloomberg News survey.
Europe’s banks will have to write off more loans this year than in 2009 and their ability to sell bonds may be curtailed by governments seeking to finance fiscal deficits, the European Central Bank said yesterday in a report.
The euro touched a level below $1.2134, the 50 percent Fibonacci retracement of its increase from its all-time low of 82.30 U.S. cents in October 2000 and its peak of $1.6038, reached in July 2008.
Fibonacci analysis is based on a theory that prices rise or fall by certain percentages after reaching a high or low. Key percentages include 23.6, 38.2, 50 and 61.8. A break above resistance, where sell orders may be clustered, or below support, where there may be buy orders, indicates a currency may move to the next level.
Quantum’s Target
“We are heading towards that level,” said Fielding, whose fund has the lowest holdings of euros since its inception in 2008. “But you can hardly use the word currency without the next word being overshoot, and we expect the euro to overshoot. That’s the area where we would be interested in buying it.”
Europe’s currency dropped 7.4 percent against the dollar in May, its sixth straight monthly decline. That’s the longest stretch since a seven-month streak ending in April 2000.
Fitch Ratings on May 28 removed Spain’s AAA credit grade, saying the nation’s debt burden is likely to weigh on economic growth.
Europe’s currency has slumped 8.4 percent this year against its major counterparts, according to Bloomberg Correlation Weighted Currency Indices. The dollar has appreciated 10 percent, while the yen advanced 13 percent.
Bank of Canada
All except two of 27 economists surveyed by Bloomberg News predict the Bank of Canada’s target rate for overnight loans between commercial banks will rise to 0.5 percent from 0.25 percent in a decision due at 9 a.m. Toronto time.
Canada’s currency is poised to strengthen against the dollar even without an increase in the central bank’s target interest rate today, Commerzbank AG said. The bank suggested investors should sell the U.S. currency versus the Canadian dollar in the event of any advance in the U.S. dollar.
“Due to the turbulence on the financial markets and concerns about the debt crisis in Europe, the council might postpone the first rate step,” a team led by Ulrich Leuchtmann in Frankfurt wrote in a note today. “In that case the Canadian dollar is likely to come under pressure, but the move should run out. After all, the first rate step would only be postponed.”
The euro dropped 0.7 percent to C$1.2766 versus the Canadian currency, while the U.S. dollar rose 0.5 percent to C$1.0498.
The Australian dollar weakened for a third day after the central bank left its benchmark interest rate unchanged at 4.5 percent and Governor Glenn Stevens sought to gauge fallout from Europe’s debt crisis.
Australia’s currency fell 1.5 percent to 83.32 U.S. cents, from 84.59 cents yesterday. The Aussie declined 1.8 percent to 75.85 yen.
The longest stretch of monthly decreases in 10 years has erased 50 percent of the euro’s rally from its October 2000 low to the July 2008 high. Canada’s dollar rose against 11 of its 16 most-traded counterparts today on speculation the central bank may become the first Group of Seven country to boost borrowing costs since last year’s recession. Europe’s currency pared its drop as stocks reduced their losses.
“There are some complications in the euro area which have stopped us from jumping in until the euro gets closer to what we see as a fair value,” said Gareth Fielding, chief investment strategist in Zug, Switzerland, at Quantum Global Wealth Management, which oversees $2.5 billion for sovereign-wealth funds and central banks. The euro’s “long-term fair value” is seen at $1.20, according to Fielding.
The euro fell as much as 1.6 percent to $1.2111, the lowest level since April 14, 2006, before trading at $1.2163 at 7:50 a.m. in New York, compared with $1.2306 yesterday. It declined 1.6 percent to 110.74 yen, from 112.31 yen. Japan’s currency strengthened 0.2 percent to 91.07 per dollar, from 91.26.
European unemployment unexpectedly rose in April, reaching a 12-year high as the region’s sovereign debt crisis undermined the outlook for the economy.
Europe’s Jobless Rate
The jobless rate in the 16-nation euro area increased to 10.1 percent, from 10 percent in March, the highest rate since June 1998, the European Union’s statistics office in Luxembourg said today. Economists had forecast that the rate would remain unchanged in April, according to the median forecast of 26 economists in a Bloomberg News survey.
Europe’s banks will have to write off more loans this year than in 2009 and their ability to sell bonds may be curtailed by governments seeking to finance fiscal deficits, the European Central Bank said yesterday in a report.
The euro touched a level below $1.2134, the 50 percent Fibonacci retracement of its increase from its all-time low of 82.30 U.S. cents in October 2000 and its peak of $1.6038, reached in July 2008.
Fibonacci analysis is based on a theory that prices rise or fall by certain percentages after reaching a high or low. Key percentages include 23.6, 38.2, 50 and 61.8. A break above resistance, where sell orders may be clustered, or below support, where there may be buy orders, indicates a currency may move to the next level.
Quantum’s Target
“We are heading towards that level,” said Fielding, whose fund has the lowest holdings of euros since its inception in 2008. “But you can hardly use the word currency without the next word being overshoot, and we expect the euro to overshoot. That’s the area where we would be interested in buying it.”
Europe’s currency dropped 7.4 percent against the dollar in May, its sixth straight monthly decline. That’s the longest stretch since a seven-month streak ending in April 2000.
Fitch Ratings on May 28 removed Spain’s AAA credit grade, saying the nation’s debt burden is likely to weigh on economic growth.
Europe’s currency has slumped 8.4 percent this year against its major counterparts, according to Bloomberg Correlation Weighted Currency Indices. The dollar has appreciated 10 percent, while the yen advanced 13 percent.
Bank of Canada
All except two of 27 economists surveyed by Bloomberg News predict the Bank of Canada’s target rate for overnight loans between commercial banks will rise to 0.5 percent from 0.25 percent in a decision due at 9 a.m. Toronto time.
Canada’s currency is poised to strengthen against the dollar even without an increase in the central bank’s target interest rate today, Commerzbank AG said. The bank suggested investors should sell the U.S. currency versus the Canadian dollar in the event of any advance in the U.S. dollar.
“Due to the turbulence on the financial markets and concerns about the debt crisis in Europe, the council might postpone the first rate step,” a team led by Ulrich Leuchtmann in Frankfurt wrote in a note today. “In that case the Canadian dollar is likely to come under pressure, but the move should run out. After all, the first rate step would only be postponed.”
The euro dropped 0.7 percent to C$1.2766 versus the Canadian currency, while the U.S. dollar rose 0.5 percent to C$1.0498.
The Australian dollar weakened for a third day after the central bank left its benchmark interest rate unchanged at 4.5 percent and Governor Glenn Stevens sought to gauge fallout from Europe’s debt crisis.
Australia’s currency fell 1.5 percent to 83.32 U.S. cents, from 84.59 cents yesterday. The Aussie declined 1.8 percent to 75.85 yen.
Euro Weakens on Concern Over Europe Spending Cuts, Bank Losses
une 1 (Bloomberg) -- The euro fell to a four-year low against the dollar on concern mounting writedowns at Europe’s banks and efforts to reduce budget deficits will hamper the region’s economic recovery.
The longest stretch of monthly decreases in 10 years has erased 50 percent of the euro’s rally from its October 2000 low to the July 2008 high. Canada’s dollar rose against 11 of its 16 most-traded counterparts today on speculation the central bank may become the first Group of Seven country to boost borrowing costs since last year’s recession. Europe’s currency pared its drop as stocks reduced their losses.
“There are some complications in the euro area which have stopped us from jumping in until the euro gets closer to what we see as a fair value,” said Gareth Fielding, chief investment strategist in Zug, Switzerland, at Quantum Global Wealth Management, which oversees $2.5 billion for sovereign-wealth funds and central banks. The euro’s “long-term fair value” is seen at $1.20, according to Fielding.
The euro fell as much as 1.6 percent to $1.2111, the lowest level since April 14, 2006, before trading at $1.2163 at 7:50 a.m. in New York, compared with $1.2306 yesterday. It declined 1.6 percent to 110.74 yen, from 112.31 yen. Japan’s currency strengthened 0.2 percent to 91.07 per dollar, from 91.26.
European unemployment unexpectedly rose in April, reaching a 12-year high as the region’s sovereign debt crisis undermined the outlook for the economy.
Europe’s Jobless Rate
The jobless rate in the 16-nation euro area increased to 10.1 percent, from 10 percent in March, the highest rate since June 1998, the European Union’s statistics office in Luxembourg said today. Economists had forecast that the rate would remain unchanged in April, according to the median forecast of 26 economists in a Bloomberg News survey.
Europe’s banks will have to write off more loans this year than in 2009 and their ability to sell bonds may be curtailed by governments seeking to finance fiscal deficits, the European Central Bank said yesterday in a report.
The euro touched a level below $1.2134, the 50 percent Fibonacci retracement of its increase from its all-time low of 82.30 U.S. cents in October 2000 and its peak of $1.6038, reached in July 2008.
Fibonacci analysis is based on a theory that prices rise or fall by certain percentages after reaching a high or low. Key percentages include 23.6, 38.2, 50 and 61.8. A break above resistance, where sell orders may be clustered, or below support, where there may be buy orders, indicates a currency may move to the next level.
Quantum’s Target
“We are heading towards that level,” said Fielding, whose fund has the lowest holdings of euros since its inception in 2008. “But you can hardly use the word currency without the next word being overshoot, and we expect the euro to overshoot. That’s the area where we would be interested in buying it.”
Europe’s currency dropped 7.4 percent against the dollar in May, its sixth straight monthly decline. That’s the longest stretch since a seven-month streak ending in April 2000.
Fitch Ratings on May 28 removed Spain’s AAA credit grade, saying the nation’s debt burden is likely to weigh on economic growth.
Europe’s currency has slumped 8.4 percent this year against its major counterparts, according to Bloomberg Correlation Weighted Currency Indices. The dollar has appreciated 10 percent, while the yen advanced 13 percent.
Bank of Canada
All except two of 27 economists surveyed by Bloomberg News predict the Bank of Canada’s target rate for overnight loans between commercial banks will rise to 0.5 percent from 0.25 percent in a decision due at 9 a.m. Toronto time.
Canada’s currency is poised to strengthen against the dollar even without an increase in the central bank’s target interest rate today, Commerzbank AG said. The bank suggested investors should sell the U.S. currency versus the Canadian dollar in the event of any advance in the U.S. dollar.
“Due to the turbulence on the financial markets and concerns about the debt crisis in Europe, the council might postpone the first rate step,” a team led by Ulrich Leuchtmann in Frankfurt wrote in a note today. “In that case the Canadian dollar is likely to come under pressure, but the move should run out. After all, the first rate step would only be postponed.”
The euro dropped 0.7 percent to C$1.2766 versus the Canadian currency, while the U.S. dollar rose 0.5 percent to C$1.0498.
The Australian dollar weakened for a third day after the central bank left its benchmark interest rate unchanged at 4.5 percent and Governor Glenn Stevens sought to gauge fallout from Europe’s debt crisis.
Australia’s currency fell 1.5 percent to 83.32 U.S. cents, from 84.59 cents yesterday. The Aussie declined 1.8 percent to 75.85 yen.
The longest stretch of monthly decreases in 10 years has erased 50 percent of the euro’s rally from its October 2000 low to the July 2008 high. Canada’s dollar rose against 11 of its 16 most-traded counterparts today on speculation the central bank may become the first Group of Seven country to boost borrowing costs since last year’s recession. Europe’s currency pared its drop as stocks reduced their losses.
“There are some complications in the euro area which have stopped us from jumping in until the euro gets closer to what we see as a fair value,” said Gareth Fielding, chief investment strategist in Zug, Switzerland, at Quantum Global Wealth Management, which oversees $2.5 billion for sovereign-wealth funds and central banks. The euro’s “long-term fair value” is seen at $1.20, according to Fielding.
The euro fell as much as 1.6 percent to $1.2111, the lowest level since April 14, 2006, before trading at $1.2163 at 7:50 a.m. in New York, compared with $1.2306 yesterday. It declined 1.6 percent to 110.74 yen, from 112.31 yen. Japan’s currency strengthened 0.2 percent to 91.07 per dollar, from 91.26.
European unemployment unexpectedly rose in April, reaching a 12-year high as the region’s sovereign debt crisis undermined the outlook for the economy.
Europe’s Jobless Rate
The jobless rate in the 16-nation euro area increased to 10.1 percent, from 10 percent in March, the highest rate since June 1998, the European Union’s statistics office in Luxembourg said today. Economists had forecast that the rate would remain unchanged in April, according to the median forecast of 26 economists in a Bloomberg News survey.
Europe’s banks will have to write off more loans this year than in 2009 and their ability to sell bonds may be curtailed by governments seeking to finance fiscal deficits, the European Central Bank said yesterday in a report.
The euro touched a level below $1.2134, the 50 percent Fibonacci retracement of its increase from its all-time low of 82.30 U.S. cents in October 2000 and its peak of $1.6038, reached in July 2008.
Fibonacci analysis is based on a theory that prices rise or fall by certain percentages after reaching a high or low. Key percentages include 23.6, 38.2, 50 and 61.8. A break above resistance, where sell orders may be clustered, or below support, where there may be buy orders, indicates a currency may move to the next level.
Quantum’s Target
“We are heading towards that level,” said Fielding, whose fund has the lowest holdings of euros since its inception in 2008. “But you can hardly use the word currency without the next word being overshoot, and we expect the euro to overshoot. That’s the area where we would be interested in buying it.”
Europe’s currency dropped 7.4 percent against the dollar in May, its sixth straight monthly decline. That’s the longest stretch since a seven-month streak ending in April 2000.
Fitch Ratings on May 28 removed Spain’s AAA credit grade, saying the nation’s debt burden is likely to weigh on economic growth.
Europe’s currency has slumped 8.4 percent this year against its major counterparts, according to Bloomberg Correlation Weighted Currency Indices. The dollar has appreciated 10 percent, while the yen advanced 13 percent.
Bank of Canada
All except two of 27 economists surveyed by Bloomberg News predict the Bank of Canada’s target rate for overnight loans between commercial banks will rise to 0.5 percent from 0.25 percent in a decision due at 9 a.m. Toronto time.
Canada’s currency is poised to strengthen against the dollar even without an increase in the central bank’s target interest rate today, Commerzbank AG said. The bank suggested investors should sell the U.S. currency versus the Canadian dollar in the event of any advance in the U.S. dollar.
“Due to the turbulence on the financial markets and concerns about the debt crisis in Europe, the council might postpone the first rate step,” a team led by Ulrich Leuchtmann in Frankfurt wrote in a note today. “In that case the Canadian dollar is likely to come under pressure, but the move should run out. After all, the first rate step would only be postponed.”
The euro dropped 0.7 percent to C$1.2766 versus the Canadian currency, while the U.S. dollar rose 0.5 percent to C$1.0498.
The Australian dollar weakened for a third day after the central bank left its benchmark interest rate unchanged at 4.5 percent and Governor Glenn Stevens sought to gauge fallout from Europe’s debt crisis.
Australia’s currency fell 1.5 percent to 83.32 U.S. cents, from 84.59 cents yesterday. The Aussie declined 1.8 percent to 75.85 yen.
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