The dollar dropped versus 13 of its 16 most-traded counterparts as speculation Europe’s debt crisis will ease and a report showing that U.S. unemployment-benefit applications fell spurred appetite for higher-yielding assets.
Mexico’s peso climbed from the lowest level against the greenback in almost a month after the jobless-claims report spurred bets the economy of its biggest trade partner is improving. The euro snapped a three-day losing streak versus the dollar as speculation grew that Spain will seek a bailout and demand increased at an Italian bond sale. Standard & Poor’s downgraded Spain yesterday to one level above junk.
“Risk is generally firmer,” Thomas Molloy, chief dealer at FX Solutions LLC, an online currency-trading company in Saddle River, New Jersey, said in a telephone interview. “In a perverse way, the downgrade of Spain is seen by some as the final precipitating factor for Spanish authorities to ask for a bailout.”
The dollar weakened 0.4 percent to $1.2928 per euro at 5 p.m. in New York after appreciating 0.4 percent earlier to $1.2826, the strongest level since Oct. 1. It approached its 200-day moving average, $1.2824, before erasing gains. The greenback rose 0.2 percent against the Japanese currency, to 78.34 yen. The euro climbed 0.6 percent to 101.27 yen.
The Dollar Index (DXY), which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trade partners, fell 0.2 percent to 79.786. It rose earlier to 80.205, the highest since Sept. 11.
Commodities gained, with the Standard & Poor’s GSCI Index of raw materials rallying as much as 1.5 percent.
The Mexican peso strengthened for the first time in five days, gaining 0.5 percent to 12.9128 per dollar after touching 13.0019, the weakest level since Sept. 13.
U.S. Labor Department figures showed applications for jobless benefits in the U.S. decreased 30,000 to total 339,000 in the week ended Oct. 6, the fewest since February 2008. A Bloomberg News survey forecast 370,000 claims.
The rand rose against all of its most-traded peers, appreciating for a third day against the dollar amid signs labor unrest that shut gold and platinum mines and spread to the transport industry is easing. The currency climbed 1 percent to 8.6625 per dollar. It had weakened 6 percent in the four days through Oct. 8 amid the turmoil.
The yen fell against all of its major peers. Japanese Finance Minister Koriki Jojima said he told a short meeting in Tokyo of his Group of Seven counterparts that the strength of the yen is hurting the nation’s economy and that countries should cooperate on foreign exchange if necessary.
The Japanese currency is trading closer to the postwar high of 75.35 yen per dollar reached last October, before the Bank of Japan (8301) sold a record 8.07 trillion yen ($103 billion) to stem its appreciation. It weakened to 84.18 in March before starting to advance again. The yen touched 77.95 per dollar today, the strongest level since Oct. 1.
Unless the Japanese currency appreciates to 76 against the dollar or 95 to the euro, “Jojima would have a hard time convincing anyone that there has been either ‘excess volatility’ or ‘disorderly movement’ that would suddenly justify intervention,” Greg Anderson, the North American head of Group- of-10 currency strategy at Citigroup Inc. in New York, wrote in a research note.
The euro may rise versus the yen to the highest in more than three weeks as a corrective pattern reverses, according to Credit Suisse Group AG, which cited technical indicators.
The shared currency entered a corrective period after reaching a four-month high of 103.86 versus the yen on Sept. 17, Cilline Bain, a London-based technical analyst at Credit Suisse, wrote today in a client note. The correction is beginning to tire, and the euro may initially rebound to 101.87 before returning to the September high, Bain wrote.
The U.S. currency is “trading primarily on what’s going on Europe,” Joseph Trevisani, chief market strategist at WorldWideMarkets in Woodcliff Lake, New Jersey, said in a telephone interview. “The Italians had a bond auction that went reasonably well.”
Italy sold 3.75 billion euros ($4.8 billion) of its benchmark three-year bond to yield 2.86 percent, more than the 2.75 percent at the last auction of the same securities on Sept. 13. Investors bid for 1.67 times the amount offered, up from 1.49 times last month.
S&P lowered Spain’s sovereign credit rating by two levels to BBB- from BBB+ and assigned a negative outlook to its debt. The country’s deepening recession is limiting government policy options, the New York-based ratings company said in a statement.
The euro climbed against the greenback as the downgrade added to pressure on the Spanish government to seek assistance. The move would make it possible for the European Central Bank to buy Spain’s bonds to contain borrowing costs under a new program to stem the region’s debt crisis.
Spanish 10-year bond yields rose to 5.93 percent today before falling to 5.75 percent. They have dropped from the euro- era record of 7.75 percent reached in July to as low as 5.55 percent since ECB President Mario Draghi said the central bank is ready to do “whatever it takes” to preserve the euro.
While the ECB unveiled an unlimited debt-purchase program on Sept. 6, Spain’s Prime Minister Mariano Rajoy has held off on a decision about whether to request aid, a condition the ECB insists on.
European Union leaders will hold a two-day summit in Brussels starting Oct. 18.
Currencies sought by investors as a haven during recent turmoil, including the British pound, Danish krone, Australian dollar and Swedish krona, will probably come under selling pressure as the “euro-zone periphery has stabilized,” according to Morgan Stanley.
Improved prospects for growth in the U.S. economy and easing tension between Iran and Israel are also reducing investors’ appetite for the currencies, the firm said today in a research report.
Sweden’s krona declined to the weakest level in three months against the euro as inflation abated more than estimated, raising the likelihood of an interest-rate cut before year-end. Statistics Sweden data showed consumer price growth slowed to an annual 0.4 percent in September, compared with 0.7 percent the prior month and a 0.6 percent forecast in a Bloomberg survey.
The krona depreciated 0.4 percent to 8.6641 per euro and reached 8.6735, its lowest level since July 4.
The euro gained 2.1 percent in the past three months, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-nation currencies. The dollar fell 4.3 percent and the yen lost 3 percent.
To contact the reporters on this story: John Detrixhe in New York at email@example.com
To contact the editor responsible for this story: Dave Liedtka at firstname.lastname@example.org