knotty
09-22-2011, 09:54 AM
I'm on bloomberg.com basically every day, and as we mongers do, paying attention to world currencies. As the Dow tanks, the dollar gains from investors fleeing risk.
Dollar Strengthens on Concern Growth Slowing; Commodity Currencies Decline
The dollar jumped and currencies of commodity exporters tumbled on concern global growth is stalling after the Federal Reserve (http://topics.bloomberg.com/federal-reserve/) said yesterday it saw “significant downside risks” to the U.S. economy (http://topics.bloomberg.com/u.s.-economy/).
The Dollar Index climbed to a seven-month high as the Fed’s statement stoked concern the global economy is headed for a recession and currency volatility surged to a 16-month high. The euro fell to the weakest level since January versus the dollar and reached a fresh decade-low against the yen after euro-area services and manufacturing contracted this month. Australia (http://topics.bloomberg.com/australia/)’s dollar slid below parity with the greenback for the first time in six weeks as a preliminary index showed China’s manufacturing may shrink for a third month.
“Investors are worried about the risks to the global economy,” said Audrey Childe-Freeman, global head of currency strategy in London (http://topics.bloomberg.com/london/) at the private-banking unit of JPMorgan Chase & Co. “Currencies that are exposed to cyclical growth fluctuations will suffer, while the dollar will benefit from the safe-haven bid.”
The dollar appreciated 1.2 percent to $1.3412 per euro at 9:04 a.m. in New York, after reaching $1.3385, the strongest since Jan. 19. The yen strengthened 1.3 percent to 102.40 per euro, after reaching 102.22, the most since June 2001. Japan (http://topics.bloomberg.com/japan/)’s currency rose 0.1 percent to 76.37 per dollar.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, increased 1.7 percent to 78.685, after rising to 78.789, the highest level since Feb. 14.
‘Downside Risks’
The Fed said yesterday following a two-day meeting that it will extend the average maturities of the Treasuries in its portfolio by purchasing $400 billion of long-term debt, while selling an equal amount of shorter-term securities.
“The Fed has obviously disappointed investors who were looking for further quantitative easing,” said Lee Hardman (http://topics.bloomberg.com/lee-hardman/), a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “That has sparked a liquidation out of risk assets, which is developing into a broad-based dollar recovery.”
The dollar may advance to the “mid 1.20s” against the euro by year-end, Hardman said.
The seven-day relative strength index for the Dollar Index surged above the 70 for the first time in more than a week to 77. A reading over that level indicates an asset may have strengthened too quickly and may be due for a correction.
The Fed will also reinvest maturing home-loan debt into mortgage-backed securities instead of Treasuries. The action “should put downward pressure on longer-term interest rates (http://topics.bloomberg.com/interest-rates/) and help make broader financial conditions more accommodative,” the Federal Open Market Committee (http://topics.bloomberg.com/federal-open-market-committee/) said.
Stocks, Treasuries
U.S. stock-index futures also dropped 2.1 percent. Yields on Treasury 10-year notes declined to records as investors demanded the perceived safety of the debt and anticipated extra demand after the Fed said yesterday it will buy bonds due in six to 30 years through June while selling debt maturing in three years or less.
“The market is piling into dollars big time,” said Chris Huddleston, a trader at Investec Bank Plc in London, which oversees about $95 billion in assets. “Equities are selling off and there’s a big move away from risk.”
The euro weakened for a fifth day against the yen after data showed euro-area services and manufacturing output shrank for the first time in more than two years in September as the region’s worsening debt crisis added to concern that the economy could slide back into a recession.
One-month implied volatility for the euro-yen exchange rate (http://topics.bloomberg.com/exchange-rate/) jumped to 19.53, the highest since June 2010. It was at 14.16 at the beginning of the month. Implied volatility for currencies of the Group of Seven nations advanced to 15.56, the highest since May 2010, a JPMorgan Chase & Co. index showed.
Commodity Rout
Standard & Poor’s GSCI index of 24 raw materials slumped 3.8 percent, erasing this year’s gains.
The Australian dollar dropped below parity with its U.S. counterpart for the first time since Aug. 9 after an index from HSBC Holdings Plc and Markit Economics predicted China (http://topics.bloomberg.com/china/)’s manufacturing may shrink for a third month in September, the longest contraction since 2009. China is Australia’s largest trading partner.
The Aussie slid 2.7 percent to 97.77 U.S. cents after falling to 97.68, the weakest since March 17. New Zealand (http://topics.bloomberg.com/new-zealand/)’s dollar sank 2.8 percent to 77.90 U.S. cents, a fourth straight day of losses against the greenback.
The New Zealand economy almost stalled last quarter, reinforcing the case for central bank Governor Alan Bollard to maintain record-low interest rates until 2012. Gross domestic product rose 0.1 percent in the three months through June from the previous quarter, a Statistics New Zealand report showed today in Wellington. The median estimate was for a 0.5 percent gain.
Brazil (http://topics.bloomberg.com/brazil/)’s real weakened 4.1 percent to 1.9525 per dollar, from 1.8756 yesterday. Canada (http://topics.bloomberg.com/canada/)’s dollar weakened to 2.6 percent to 1.0341, from 1.0081, in the biggest intraday decline since May 2010.
Dollar Strengthens on Concern Growth Slowing; Commodity Currencies Decline
The dollar jumped and currencies of commodity exporters tumbled on concern global growth is stalling after the Federal Reserve (http://topics.bloomberg.com/federal-reserve/) said yesterday it saw “significant downside risks” to the U.S. economy (http://topics.bloomberg.com/u.s.-economy/).
The Dollar Index climbed to a seven-month high as the Fed’s statement stoked concern the global economy is headed for a recession and currency volatility surged to a 16-month high. The euro fell to the weakest level since January versus the dollar and reached a fresh decade-low against the yen after euro-area services and manufacturing contracted this month. Australia (http://topics.bloomberg.com/australia/)’s dollar slid below parity with the greenback for the first time in six weeks as a preliminary index showed China’s manufacturing may shrink for a third month.
“Investors are worried about the risks to the global economy,” said Audrey Childe-Freeman, global head of currency strategy in London (http://topics.bloomberg.com/london/) at the private-banking unit of JPMorgan Chase & Co. “Currencies that are exposed to cyclical growth fluctuations will suffer, while the dollar will benefit from the safe-haven bid.”
The dollar appreciated 1.2 percent to $1.3412 per euro at 9:04 a.m. in New York, after reaching $1.3385, the strongest since Jan. 19. The yen strengthened 1.3 percent to 102.40 per euro, after reaching 102.22, the most since June 2001. Japan (http://topics.bloomberg.com/japan/)’s currency rose 0.1 percent to 76.37 per dollar.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, increased 1.7 percent to 78.685, after rising to 78.789, the highest level since Feb. 14.
‘Downside Risks’
The Fed said yesterday following a two-day meeting that it will extend the average maturities of the Treasuries in its portfolio by purchasing $400 billion of long-term debt, while selling an equal amount of shorter-term securities.
“The Fed has obviously disappointed investors who were looking for further quantitative easing,” said Lee Hardman (http://topics.bloomberg.com/lee-hardman/), a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “That has sparked a liquidation out of risk assets, which is developing into a broad-based dollar recovery.”
The dollar may advance to the “mid 1.20s” against the euro by year-end, Hardman said.
The seven-day relative strength index for the Dollar Index surged above the 70 for the first time in more than a week to 77. A reading over that level indicates an asset may have strengthened too quickly and may be due for a correction.
The Fed will also reinvest maturing home-loan debt into mortgage-backed securities instead of Treasuries. The action “should put downward pressure on longer-term interest rates (http://topics.bloomberg.com/interest-rates/) and help make broader financial conditions more accommodative,” the Federal Open Market Committee (http://topics.bloomberg.com/federal-open-market-committee/) said.
Stocks, Treasuries
U.S. stock-index futures also dropped 2.1 percent. Yields on Treasury 10-year notes declined to records as investors demanded the perceived safety of the debt and anticipated extra demand after the Fed said yesterday it will buy bonds due in six to 30 years through June while selling debt maturing in three years or less.
“The market is piling into dollars big time,” said Chris Huddleston, a trader at Investec Bank Plc in London, which oversees about $95 billion in assets. “Equities are selling off and there’s a big move away from risk.”
The euro weakened for a fifth day against the yen after data showed euro-area services and manufacturing output shrank for the first time in more than two years in September as the region’s worsening debt crisis added to concern that the economy could slide back into a recession.
One-month implied volatility for the euro-yen exchange rate (http://topics.bloomberg.com/exchange-rate/) jumped to 19.53, the highest since June 2010. It was at 14.16 at the beginning of the month. Implied volatility for currencies of the Group of Seven nations advanced to 15.56, the highest since May 2010, a JPMorgan Chase & Co. index showed.
Commodity Rout
Standard & Poor’s GSCI index of 24 raw materials slumped 3.8 percent, erasing this year’s gains.
The Australian dollar dropped below parity with its U.S. counterpart for the first time since Aug. 9 after an index from HSBC Holdings Plc and Markit Economics predicted China (http://topics.bloomberg.com/china/)’s manufacturing may shrink for a third month in September, the longest contraction since 2009. China is Australia’s largest trading partner.
The Aussie slid 2.7 percent to 97.77 U.S. cents after falling to 97.68, the weakest since March 17. New Zealand (http://topics.bloomberg.com/new-zealand/)’s dollar sank 2.8 percent to 77.90 U.S. cents, a fourth straight day of losses against the greenback.
The New Zealand economy almost stalled last quarter, reinforcing the case for central bank Governor Alan Bollard to maintain record-low interest rates until 2012. Gross domestic product rose 0.1 percent in the three months through June from the previous quarter, a Statistics New Zealand report showed today in Wellington. The median estimate was for a 0.5 percent gain.
Brazil (http://topics.bloomberg.com/brazil/)’s real weakened 4.1 percent to 1.9525 per dollar, from 1.8756 yesterday. Canada (http://topics.bloomberg.com/canada/)’s dollar weakened to 2.6 percent to 1.0341, from 1.0081, in the biggest intraday decline since May 2010.