Bloomberg News

Dollar Weakens as Stocks Extend Global Rally Before Jobs Data

February 02, 2012

Feb. 2 (Bloomberg) -- The dollar weakened against most of its 16 major counterparts as Asian stocks extended a global rally ahead of U.S. data that may show an improving job market, curbing demand for refuge assets.

The 17-nation euro held yesterday’s gain versus the greenback after German Chancellor Angela Merkel said Europe must be united in protecting stability in the currency. A gauge of volatility for the yen climbed to the highest this year amid speculation Japan will intervene in the foreign-exchange market. Australia’s dollar touched a five-month high.

“Risk appetite is fairly positive at the moment, and this could continue for a couple of weeks,” said Derek Mumford, a director in Sydney at Rochford Capital, a currency-risk management company. “Typical safe-haven currencies have taken a step back now.”

The dollar dropped 0.1 percent to $1.3178 per euro as of 6:37 a.m. in London from $1.3161 in New York yesterday when it slid 0.6 percent. The yen was little changed at 100.30 per euro after losing 0.5 percent yesterday. The Japanese currency traded at 76.12 per dollar, 1 percent from the record high of 75.35 set on Oct. 31.

The MSCI Asia Pacific Index of shares gained 1.1 percent, heading for the biggest advance in almost two weeks, after the Standard & Poor’s 500 Index rose 0.9 percent yesterday.

Applications for unemployment payments in the U.S. probably fell to 371,000 in the week ended Jan. 28 from 377,000 the previous week, according to the median estimate of economists in a Bloomberg News survey. The Labor Department will release the figures today.

Merkel said in a speech in Beijing today that Europe’s crisis was with sovereign debt, not it’s shared currency. The euro “needs our joint protection and we have got to be united,” she said.

‘Decisive’ Actions

Implied volatility for one-month dollar-yen options increased to 8.435 percent yesterday, the highest since Dec. 5.

Japanese Finance Minister Jun Azumi today said he “can’t overlook” speculative moves in the foreign-exchange market and is ready take “decisive” actions if necessary. His ministry sold the yen on Oct. 31 when it climbed to the postwar record of 75.35 per dollar, eroding earnings at exporters.

“There is caution against possible intervention beyond the 76 per dollar mark,” said Kazuo Shirai, a trader at Union Bank NA in Los Angeles.

The yen has gained 5.7 percent over the past six months, the second-best performance after the dollar among the 10 currencies tracked by the Bloomberg Correlation-Weighted Indexes. The euro has lost 2.2 percent.

Greek Negotiations

Demand for the euro was limited as Greece struggles to reach agreement with private creditors on writedowns on the nation’s debt. Prime Minister Lucas Papademos said Jan. 31 that he wants to bring the negotiations on a debt-swap agreement “to a successful conclusion by the end of the week.”

In discussions late last week in Athens, bondholders lowered their demands for an average coupon on the new 30-year securities they would receive to as little as 3.6 percent from 4.25 percent after European officials demanded they take steeper losses, people familiar with the matter said at the time.

“The euro is vulnerable to the downside,” said Annette Beacher, head of Asia-Pacific research at TD Securities Inc. in Singapore. “I don’t think there’s really big improvement out of Europe yet. We’re a long way from being out of the woods.”

Australian Trade

Australia’s dollar reached a five-month high after a report showed the nation’s trade surplus widened in December to A$1.71 billion ($1.83 billion) from a revised A$1.34 billion the previous month. Economists had estimated a surplus of A$1.2 billion.

The so-called Aussie climbed 0.2 percent to $1.0726 after touching $1.0757, the most since Sept. 1. New Zealand’s dollar, nicknamed the kiwi, added 0.2 percent to 83.39 U.S. cents.

“The so-called risk currencies like Aussie and kiwi can be very well-supported,” said Joseph Capurso, a foreign-exchange strategist in Sydney at Commonwealth Bank of Australia.

South Korea’s won jumped as central bank data showed the nation’s foreign-exchange reserves increased by $4.94 billion to $311.3 billion at the end of January from a month earlier. A separate report from the Financial Supervisory Service indicated that foreign funds bought 6.2 trillion won ($5.5 billion) more Korean shares than they sold in January, the most since the regulator began tracking the data in 1992.

The won gained as much as 0.8 percent to 1,117.35 per dollar, the strongest since Nov. 14, before trading at 1,118.35.

--With reporting by Mika Otsuka in New York. Editors: Rocky Swift, Benjamin Purvis

To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.


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