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Dollar Remains Lower Before U.S. Factory Orders

The dollar declined against most of its major peers as signs of recovery in the U.S. economy sapped demand for the relative safety of the world’s reserve currency.

The greenback slid versus the New Zealand dollar before a government report today forecast to show U.S. factory orders rebounded in February, extending a drop from yesterday when an index showed manufacturing growth accelerated in March. Australia’s currency maintained a gain before the central bank meets today in Melbourne. The yen gained amid speculation traders pared bets that the currency will weaken.

Strong U.S. data are “certainly helping global growth in terms of stability in economic outlook,” said Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney. “The U.S. dollar tends to generally underperform in that environment.”

The dollar weakened 0.4 percent to 81.78 yen as of 9:39 a.m. in Tokyo. The greenback was at $1.3334 per euro from $1.3321. The U.S. currency lost 0.1 percent to 82.44 cents per New Zealand dollar after dropping 0.6 percent yesterday. The yen advanced 0.3 percent to 109.04 per euro.

Orders (TMNOCHNG) to U.S. factories probably rose 1.5 percent in February after a 1 percent drop in the previous month, according to the median estimate of economists in a Bloomberg News survey. The Commerce Department releases the figures today.

The Institute for Supply Management’s factory index climbed to 53.4 in March from 52.4 in the prior month, a report from the Tempe, Arizona-based group showed yesterday. Readings greater than 50 signal growth. The median forecast in a Bloomberg survey called for a gain to 53.

Australian Rates
The Reserve Bank of Australia will hold its overnight cash target unchanged at 4.25 percent for a third month, after reducing borrowing costs twice in the last quarter of 2011, according to all 24 economists in a Bloomberg survey. Traders expect the RBA will cut its benchmark by 75 basis points over the coming 12 months, according to a Credit Suisse Group AG index based on overnight indexed swap rates.

The Australian dollar traded little changed at $1.0424, after climbing 0.7 percent yesterday. The so-called Aussie slipped 0.3 percent to 85.25 yen.

The yen strengthened against the dollar for a second day after futures bets that Japan’s currency will fall reached the most extreme level since July 2007.

The difference in the number of wagers by hedge funds and other large speculators on a decline in the yen versus the dollar compared with those on a gain -- so-called net shorts -- was 67,622 on March 27, compared with 25,821 a week earlier, figures from the Commodity Futures Trading Commission showed.

“It may just be that we’re seeing a repositioning,” said Sean Callow, a senior currency strategist in Sydney at Westpac Banking Corp. (WBC) “If speculative positions were instrumental in the rally in dollar-yen, then they’re probably going to be instrumental in the decline.”