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The dollar rose against most of its major counterparts as concern increased that China’s economic growth outlook has cooled, spurring demand for the currency of the world’s largest economy.
Higher-yielding currencies weakened, led by the New Zealand and Australian dollars, as global stocks declined amid reduced demand for risk. The U.S. currency strengthened after BHP Billiton Ltd. (BHP) said China’s steel production is slowing, boosting concern about the nation’s growth outlook. The euro fell against the dollar after earlier briefly erasing losses.
“The Chinese slowdown had an effect on the commodity currencies, such as Aussie and kiwi, which we saw come off,” said Fabian Eliasson, head of U.S. currency sales at Mizuho Financial Group Inc. in New York. “We had a fairly good risk-on type of scenario for the past week and we were due for a little bit of a pullback.”
The dollar climbed 1.1 percent to 81.72 cents versus New Zealand’s currency at 5 p.m. in New York. It strengthened 1.2 percent to $1.0480 per Australian dollar. The euro dropped 0.1 percent to $1.3225 after earlier weakening as much as 0.5 percent. The dollar gained 0.4 percent to 83.70 yen.
The Standard & Poor’s 500 Index (SPX) fell 0.3 percent after earlier declining as much as 0.9 percent, and the Dow Jones Industrial Average dropped 0.5 percent. It reached 13,289 March 16, its highest level since 2007.
“The bounce in currencies the last few days didn’t really seem to have much underpinning it and whoever the buyer has been ran out of steam,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York.
The euro rose 0.4 percent against the dollar last week and the Swedish krona added 0.9 percent to 6.7438.
Canada’s dollar fell as much as 1 percent against its U.S. counterpart as oil prices dropped. Crude fell as much as 2.5 percent to $105.35 a barrel before trading at $105.61. Oil is Canada’s largest export.
The U.S. currency has gained 0.8 percent in the past month according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The euro advanced 0.7 percent, and the yen weakened 4.5 percent.
Implied volatility of three-month options of Group of Seven currencies rose to 9.97 percent, snapping a three-day drop. It reached 10.72 last week, its highest level since Feb. 16, according to the JPMorgan G7 Volatility Index.
The pound strengthened against most of its 16 major peers tracked by Bloomberg after U.K. data showed inflation slowed less than economist estimates in February. Consumer prices rose 3.4 percent from a year earlier, compared with the 3.3 percent median estimate of 36 economists in a Bloomberg survey.
Sterling advanced most against the New Zealand and Australian dollars.
The euro may weaken to an 18-month low against the pound after falling below a key level of so-called support, Commerzbank AG said, citing trading patterns.
The 17-nation currency last week dropped through the 55-day moving average, currently at 83.49 pence per euro, and is now poised to weaken beyond the January low of 82.21 pence, Karen Jones, head of fixed-income, commodity and currency technical analysis in London, wrote in a research report.
“Euro-pound has eroded the two-month uptrend, currently at 83.20 pence, but seen no follow through on the downside,” Jones wrote. “The longer-term outlook will remain bearish with a drop below the January low of 82.21 being on the cards.”
The euro rose 0.1 percent to 83.36 pence, after declining to 82.84 pence yesterday, the weakest since Feb. 16. The last time the currency dropped below 82.21 pence was Sept. 10, 2010.
BHP, whose biggest customer is China, is re-evaluating spending plans amid slowing Chinese growth, the Australian Financial Review reported today, citing comments by Chairman Jacques Nasser to investors.
China’s Premier Wen Jiabao this month announced an economic growth target of 7.5 percent for this year, down from an annual 8 percent over the past seven years. Steel output growth in China, the biggest producer, may slow to 4 percent this year, the China Iron and Steel Association said March 6.
“Comments from BHP and Rio Tinto talking about a slowdown in China are hurting commodity currencies led by the Australian dollar,” said Tim Kelleher, Auckland-based head of institutional foreign-exchange sales at ASB Institutional, a unit of Commonwealth Bank of Australia. (CBA) “The U.S. dollar and yen are rallying.”
The euro fell against the greenback and pound as concern mounted about European economic growth. The Netherlands today increased its 2013 budget deficit forecast to 4.5 percent of gross domestic product from a previous estimate of 4.6 percent.
The German Federal Statistics Office said today that producer prices climbed 0.4 percent from January, when they gained 0.6 percent. The median estimate in a Bloomberg News survey of analysts called for an increase of 0.5 percent.
Housing starts in the U.S. fell in February from a three- year high, showing the recovery in the residential real estate market will take time to develop.
Builders broke ground on 698,000 homes at an annual rate, in line with the median forecast of economists surveyed by Bloomberg News and down 1.1 percent from a January pace that was stronger than previously reported, Commerce Department figures showed today in Washington. Building permits, a proxy for future construction, climbed to the highest level since October 2008.
“Yes the U.S. may be recovering but with the rest of the world in a slowdown, how beneficial is that going to be,” said Geoffrey Yu, a currency analyst at UBS AG in London.
The Dollar Index (DXY), which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, rose 0.2 percent 79.627.
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