Dollar Reaches Six-Month High as Improving Economy Boosts Allure

The dollar rose to a six-month high against the yen after signs of improvement in the world’s largest economy boosted the allure of U.S. assets.

The Bloomberg U.S. Dollar Index traded near a two-week high before data next week forecast to show U.S. manufacturing expanded for a sixth month. The euro retreated from a four-year high against the yen as technical indicators signaled its recent gains were excessive. The Australian dollar rallied from a two-month low after business investment unexpectedly grew.

“A string of reasonably positive data in the U.S. is probably going to help the dollar via higher treasury yields,” said Michael Turner, a debt and currency strategist at Royal Bank of Canada in Sydney. Yields on Japanese government bonds “have been falling fairly consistently for the past four or five months and that’s kept the yen fairly weak.”

The dollar was little changed at 102.07 yen as of 10:51 a.m. in Tokyo from yesterday, after touching 102.28, the strongest level since May 29. It traded at $1.3572 against the euro from $1.3579. The shared currency declined 0.2 percent to 138.47 yen after touching 138.84, the highest since June 2009.

The Bloomberg U.S. Dollar Index, which tracks the currency against 10 major peers, rose 0.3 percent to 1,021.55 yesterday, the highest close since Nov. 12. The gauge was at 1,020.99.

The benchmark U.S. 10-year yield gained three basis points, or 0.03 percentage point, yesterday, to 2.74 percent. Similar-dated Japanese government bonds yielded 0.605 percent today.

U.S. markets are closed for Thanksgiving holiday.

(Source: Bloomberg)

Euro Gains Versus Major Peers on ECB Speculation; Real Tumbles

The euro strengthened against most major peers amid speculation the European Central Bank won’t add to monetary accommodation efforts that may push the shared currency lower.

The yen gained for the first time in four days versus the dollar after minutes of the Bank of Japan’s October meeting showed some officials saw risks to the economy. Europe’s 17-nation shared currency climbed versus the greenback as China’s central-bank governor said it was important to his nation’s reserve management and an ECB policy maker said inflation should pick up gradually. Brazil’s real fell against most major counterparts.

The euro strengthened 0.4 percent to $1.3572 per dollar at 5 p.m. New York time after rising to $1.3575, the highest level since Nov. 20. The 17-nation currency was little changed at 137.46 yen. Japan’s currency appreciated 0.4 percent to 101.28 per dollar after gaining 0.5 percent, the most since Nov. 13.

Australia’s dollar fell 0.8 percent to 92.44 yen after decreasing 1 percent to 92.25, the weakest since Oct. 10.

The Bloomberg U.S. Dollar Index, which tracks the currency against 10 major counterparts, fell 0.2 percent to 1,018.83 after gaining 0.1 percent.

(Source: Bloomberg)

Most Asia Stocks Fall as Valuations Approach 6-Month High

 Most Asian stocks declined, dragging the regional benchmark index lower for the first time in three days, after valuations climbed to near the highest level in six months.

Honda Motor Co. (7267) slid 1.2 percent as the yen strengthened against the dollar, weakening the earnings prospects for Japanese carmakers. Doosan Engineering & Construction Co. (011160) slumped 15 percent after the Korea Economic Daily said the Seoul-based provider of civil engineering and architectural services will sell redeemable convertible preferred shares. Perseus Mining Ltd. rose 5.5 percent in Sydney, leading a rebound in gold producers after the precious metal climbed.

The MSCI Asia Pacific Index slid less than 0.1 percent to 141.74 as of 9:46 a.m. in Hong Kong, with four shares falling for every three that advanced. The measure rose 9.6 percent this year through yesterday as investors bet the Federal Reserve will maintain its bond buying into 2014.

Valuations on the MSCI Asia Pacific Index yesterday climbed to 13.9 times estimated earnings, close to the multiple of 14 reached on Nov. 18, the highest level since May, according to data compiled by Bloomberg. That compares with 16.3 yesterday on the S&P 500 and 15.2 for the Stoxx Europe 600 Index.

(Source: Bloomberg)

Pound Gulf Widens as Traders Reject Economist Doubts: Currencies

Warnings by economists that the U.K. recovery is too fragile for the Bank of England to curb monetary stimulus are going unheeded in the foreign-exchange market, where no currency can match the pound’s gains since March.

Sterling is at its strongest since 2010 against a basket of the dollar, euro, yen and six other top currencies based on Bloomberg Correlation-Weighted Indexes. The pound is up 8.8 percent versus the dollar since March 12, the most of 31 major developed- and emerging-market currencies tracked by Bloomberg.

While traders are betting on the BOE being the first major central bank to tighten policy as unemployment falls and inflation holds above targeted levels, 71 percent of economists in a Bloomberg survey published Nov. 20 said the recovery has yet to achieve “escape velocity.” That’s a term BOE Governor Mark Carney has used to describe conditions that will allow him to raise interest rates from a record low.

(Source: Bloomberg)

U.K. Yields Rise on Fed; Pound Reaches 3-Year High Versus Aussie

U.K. government bonds fell, with 10-year yields touching a two-month high, after Federal Reserve minutes showed officials may reduce debt purchases and data pointed to accelerating British growth.

Gilts underperformed other European sovereigns, with the extra yield that investors demand to hold U.K. 10-year bonds instead of similar-maturity German bunds expanding to the most since October 2005. The pound strengthened versus all of its 16 major counterparts, reaching three-year highs against the Australian and Canadian dollars, after an industry report showed a measure of new orders at British factories rose to the highest in almost two decades in November.

The benchmark 10-year yield climbed nine basis points, or 0.09 percentage point, to 2.82 percent at 5:28 p.m. London time, after rising to 2.87 percent, the highest since Sept. 24. The 2.25 percent bond due in September 2023 fell 0.705, or 7.05 pounds per 1,000-pound ($1,617) face amount, to 95.17.

U.S. policy makers “generally expected” improvement in employment data that would “warrant trimming the pace of purchases in coming months,” according to minutes of the Fed’s Oct. 29-30 meeting released yesterday. The central bank buys $85 billion of Treasuries and mortgage-backed securities a month. The Fed next meets on Dec. 17-18.

(Source: Bloomberg)