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Dollar Trades Near Lowest This Month Versus Euro on Fed

The dollar traded 0.1 percent from its lowest level this month against the euro after Federal Reserve Chairman Ben S. Bernanke said accommodative monetary policy is still needed, reducing demand for U.S. assets.

The greenback has weakened against all but one of its 16 major counterparts this year and Bernanke’s comments added to speculation the Fed will embark on a third round of quantitative easing, or QE3. The yen weakened as Asian stocks extended a global rally in equities. The euro remained higher after a two- day advance against the yen amid optimism European finance ministers will agree to bolster the region’s debt-crisis firewall when they meet March 30.

“The U.S. dollar is going to find it difficult to rally,” said Andrew Salter, a strategist in Sydney at Australia & New Zealand Banking Group Ltd. (ANZ) Bernanke’s comments “were taken to mean the chances of QE3 were more likely,” Salter said.

The dollar traded at $1.3362 per euro at 10:05 a.m. in Tokyo, little changed from $1.3359 yesterday, when it touched $1.3368, the weakest since Feb. 29. The greenback has declined 3 percent this year against the common currency.

The yen fell to 82.89 per dollar from 82.82 yesterday, when it slid 0.6 percent. The euro rose 0.1 percent to 110.75 yen, after gaining 1.3 percent to 110.65 yesterday.

The MSCI Asia Pacific Index (MXAP) of stocks rose 0.9 percent following a 1.2 percent advance in The MSCI World Index yesterday.

Bernanke’s Comments
Bernanke is scheduled to give a lecture today at George Washington University. The drop in the U.S. jobless rate may reflect “a reversal of the unusually large layoffs that occurred during late 2008 and over 2009,” Bernanke said in a speech yesterday in Arlington, Virginia.

“To the extent that this reversal has been completed, further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies.”

The Fed bought $2.3 trillion of securities in two rounds of quantitative easing from December 2008 to June 2011. The U.S. central bank has held its target interest rate to a range of zero to 0.25 percent since December 2008.

Higher-Yielding Currencies
Currencies linked to global growth, including the Australian and New Zealand dollars, remained higher against the yen before U.S. data forecast to show orders for durable goods increased in February.

In the U.S., bookings for long-lasting U.S. factory goods rose 3 percent last month, according to the median estimate of economists surveyed by Bloomberg before the Commerce Department releases its figures tomorrow.

The Australian dollar fetched 87.24 yen from 87.25 yesterday, when it climbed 1.2 percent. New Zealand’s currency, nicknamed the kiwi, added 0.1 percent to 68.23 yen.

“With ample liquidity left in the system, investors are seeking returns from higher yielding assets,” said Yuki Sakasai, a currency strategist at Barclays Capital in New York. “Risk appetite will be boosted because the Fed is maintaining an easing stance while the U.S. economy continues to perform well. It’s very natural for money to flow into the Australian dollar from the likes of the yen and U.S. dollar.”

The yen has depreciated 11 percent this year, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar was fallen 2.9 percent, the second-biggest drop. The euro has gained 0.4 percent, while the kiwi dollar’s 3.5 percent jump is the biggest advance.

Rescue Funds
Germany’s Chancellor Angela Merkel said yesterday that her country may back plans for Europe’s temporary and permanent rescue funds to run in parallel. Finance ministers will meet in Copenhagen this week to discuss the prospect of combining the temporary European Financial Stability Facility and its permanent successor from July, the European Stability Mechanism.

“It’s certainly a positive for the euro if they manage to expand the bailout mechanism in Europe,” said ANZ’s Salter, who expects the currency to rise to $1.37 by year-end. “The risk discount that has been priced into the euro as a result of the potential for some serious deterioration in sovereign funding would be removed if that bailout package is in place.”

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Korn: Weaker baht would increase oil prices - Thailand

Former finance minister Korn Chatikavanij has warned the government that intervening in the foreign exchange market to weaken the baht would result in an increase in oil prices and hurt the economy.

Mr Korn was responding on Tuesday to Deputy Prime Minister Kittiratt Na-Ranong's comment that the Thai currency should be depreciated to a range of 32 to 34 per US dollar to help exporters and stimulate economic growth. Mr Kittiratt is also finance minister.

Mr Korn said the Bank of Thailand is responsible for overseeing the exchange rate, especially monetary policy, and the interest rate.

He asked if the political sector was trying to intervene in the central bank's area of responsibility, because adjusting the interest rate would have a significant impact to the economy.

"The people are now suffering from rising product prices as a result of the government's energy policy.

"Reducing the interest rate in order to weaken the baht would cause the price of fuel bought from foreign countries to increase, and the people would suffer even more.

"The government must think carefully whether this is a policy that would benefit major businessmen and hurt the people at the same time," the opposition Democrat deputy leader said.

He said it was fortunate that the monetary market did not give importance to Finance Minister Kittiratt's comment about his plan to weaken the baht since the BOT has the actual tools to implement the plan.

"The finance minister should instead focus more on ways to solve the people's problems stemming from the high cost of living," Mr Korn said.

Mr Kittiratt has responded to concerns expressed by economists that a weaker baht would hurt the country because it would increase the cost of imported fuel, by asserting that the fluctuation in global oil prices is an uncontrollable factor.

"But the global oil price fluctuations affect every country and it would not hurt the country’s trade competitiveness as some people fear," the deputy premier said.

Fiscal Policy Office director general Somchai Sujjapongse said on Tuesday the FPO has raised its gross domestic product growth projection for 2012 to 5.5 per cent, from the previous prediction of five per cent.

The revised forecast was based on the expectation that investment by the private sector would increase by about 11.9 per cent this year, up from 7.3 per cent reported last year. The investment from the public sector was expected to grow by 12.7 per cent, from minus 8.7 per cent last year, said Mr Somchai.

Domestic consumption by both the public and private sectors is projected to go up by 4.5 per cent, from only 1.4 per cent increase in the consumption of the public sector and 1.3 per cent of the private sector, he added.

The average price of global crude oil is projected at US$118 a barrel for the year and the exchange rate is forecast at 31 baht per dollar. The key policy rate of the central bank is expected to increase to 3.25 per cent this year, up from the current rate at 3.00 per cent, the FPO chief said.

Exports growth for the year is projected at 13.5 per cent, while general inflation would be around 3.6 per cent and 2.3 per cent for core inflation, which excludes food and energy.

Mr Somchai said factors that would boost economic expansion this year were the recovery in the production sector, which accounted for 41 per cent of GDP, and the 350 billion baht worth investment projects under the government’s water resources management and flood prevention master plan.

The FPO's GDP growth projection was in line with that of the Economic and Social Development Board which recently forecast economic growth for the year at between 5.5 per cent and 6.5 per cent, up from the previous figure of 4.5 to 5.5 per cent.

The BOT also increased its growth projection for 2012 from 4.9 per cent to 5.7 per cent recently.

The substantial increase in investment by both the public and private sectors would result in the decline in trade surplus, to only $7.3 billion, from $23.5 billion reported last year.

In addition, the increase in imports of machinery and capital goods would make the country experience a current account deficit of about $3.5 billion, or about 105 billion baht, compared with a $11.9 billion current account surplus last year.

Former finance minister and former cedntral bank chief Pridiyathorn Devakula said he expected that GDP growth this year would not be as much as five per cent and could even stay at only four per cent.

Exports would not substantially expand as in the past years due to the fragile economies in the United States and the European Union and a slower pace of economic growth in China. There was no support factor to boost economic growth in Thailand as before, said M.R. Pridiyathorn.

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Yen Gains Versus Peers as Stock Drop Boosts Refuge Demand

The yen gained versus all of its major counterparts as investors flocked to refuge assets amid a decline in Asian equities.

The euro held near a one-month high against the greenback before a European finance ministers’ summit this week where they are expected to agree to bolster the region’s debt-crisis firewall. The U.S. currency rose against the Australian and New Zealand dollars before a report forecast to show orders for durable goods rose last month, reducing the case for further easing by the Federal Reserve.

“U.S. stocks fell and Asian stocks are a bit lower,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “If the stock market were to come under further pressure, then you’ll likely see Aussie down against the yen, euro down against the yen.”

The yen added 0.3 percent to 82.97 per dollar as of 10:15 a.m. in Tokyo. It fetched 110.65 per euro from 110.75. The 17- nation currency gained 0.2 percent to $1.3337 after climbing to $1.3386 yesterday, the highest since Feb. 29. Australia’s dollar weakened 0.2 percent to $1.0443 and New Zealand’s dipped 0.2 percent to 81.94 U.S. cents.

The MSCI Asia Pacific Index (MXAP) of stocks lost 0.2 percent. The Standard & Poor’s 500 Index fell 0.3 yesterday, while the Stoxx Europe 600 Index declined 0.5 percent

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Australian, N.Z. Dollars Fall Against Peers on Asia Stock Drops

The Australian and New Zealand dollars slid against most major peers as Asian stocks extended a global retreat, sapping demand for higher-yielding assets.

Both currencies are headed for their first monthly drop this year amid concern Chinese manufacturing will slow, curbing demand for resource exports. The so-called Aussie touched a five-month low against New Zealand’s currency ahead of reports forecast to show annual growth in bank lending was the slowest since August in the larger nation.

“A drop in Asian stocks is a negative catalyst for the South Pacific nations’ currencies,” said Takuya Kawabata, a researcher at Gaitame.com Research Institute Ltd. in Tokyo, a unit of Japan’s largest currency-margin company. “We’d like to be cautious about a Chinese slowdown because it weighs on Australia’s dollar.”

The Aussie declined 0.3 percent to $1.0435 as of 11:54 a.m. in Sydney from yesterday when it dropped 0.7 percent. It sank to as low as NZ$1.2733, a level unseen since Oct. 12. The New Zealand dollar, nicknamed the kiwi, lost 0.2 percent to 81.88 U.S. cents.

The Australian dollar has lost 2.8 percent against the U.S. currency this month, while the kiwi has declined 1.8 percent.

The MSCI Asia Pacific Index (MXAP) of shares dropped 0.3 percent today after the Standard & Poor’s 500 Index fell 0.3 percent in New York yesterday.

HSBC Holdings Plc and Markit Economics said on March 22 that their flash reading for Chinese manufacturing this month was at 48.1, compared with a final 49.6 in February and below the 50 level that divides expansion from contraction. The China Federation of Logistics & Purchasing will issue its purchasing managers index on April 1, with economists predicting a 51 figure. The nation is Australia’s largest overseas market and New Zealand’s second-biggest export destination.

Private credit increased 3.3 percent in February, compared with a 3.5 percent gain the prior month, according to the median estimate of economists in a Bloomberg News survey. The Reserve Bank of Australia will release the figure on March 30.

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Myanmar Float Helps Exporters Buying Kyat in Black Market

Myanmar’s move to a managed float of the kyat may weaken the grip of the black market, where appreciation has been hurting exporters.

“The dollar has seen some weakening pressure against the kyat and that is quite a big pain for exporters,” Toshihiro Mizutani, managing director of the Japan External Trade Organization in Yangon, said in an interview on March 28. “If they can manage to keep it from rising fast it would help.”

The biggest financial market policy shift since President Thein Sein took power a year ago is an attempt to unify the multiple exchange rates in the Asian nation of 64 million people. The official rate, pegged to the International Monetary Fund’s special drawing rights, is 6.4 kyat per dollar, about 125 times stronger than the black market rate and available only to state-owned companies.

The central bank plans to gradually unify the “various” other rates used by private enterprises and influence the market rate, it said in a statement published in the state-run New Light of Myanmar this week. The bank will publish a reference rate for its currency daily starting April 1, scrapping a 35- year fixed exchange rate, it said.

It may set the new official kyat level near the black- market rate at about 820 to the dollar, which has appreciated from about 1,055 in 2009, according to a research report yesterday by Bank of America Corp.’s Merrill Lynch. The currency may be allowed to move as much as 2 percent either side of the reference rate, the U.S. bank said.

Chinese Example
China also had an artificially strong currency until 1994, when it abolished foreign-exchange certificates that had allowed state-owned companies to buy dollars cheaper than in the black market. Exporters were able to use a weaker exchange rate for the yuan when bringing dollars back to China. The official and market rates were unified at 8.7 yuan per dollar under a “floating exchange-rate system,” devaluing the yuan’s official rate by 40 percent.

“A managed float means it will be controlled around a fixed range and should benefit everyone because it creates a bit more stability,” Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd. in Singapore, said in an interview yesterday. “It’s going to be somewhat similar to what China is doing.”

Bordering China and India and with the second-largest land area in Southeast Asia behind Indonesia, Myanmar’s resources include rubber and natural gas, as well as deposits of gold, copper and gemstones. Gross domestic product is projected to increase 5.5 percent this year, the same pace as 2011, according to an IMF estimate.

Imports Surge
Exports increased 19 percent in the fiscal year through March 2011, while imports surged 55.5 percent, according to JETRO, citing Myanmar government data. Thailand was the country’s biggest market, taking almost 33 percent of overseas shipments, followed by Hong Kong and China. China is the biggest source of imports, followed by Singapore and Thailand.

“They have natural resources and they have a lot of interest coming in the form of investment,” Malayan Banking’s Supaat said. “The pressure is towards greater appreciation.”

Scrapping the complex multiple-rate system would reduce constraints on growth in a country with the potential to become “the next economic frontier in Asia,” the Washington-based IMF, which has provided guidance to Myanmar, said on Jan. 25.

“It levels the playing field, makes life easier, more transparent, more rational,” Sean Turnell, a professor at Macquarie University in Sydney who has researched Myanmar’s economy, said in a telephone interview on March 29. “It was never possible to be entirely sure who was using what rate, and that opens the window to rent-seeking and corruption.”

U.S. Sanctions
The U.S. and European nations have pledged to review sanctions after April 1 by-elections involving dissident leader Aung San Suu Kyi. The U.S. bans imports from Myanmar, restricts money transfers, freezes assets and targets jewelry with gemstones originating in the country. The European Union bans weapons sales and mineral imports.

Local laws prevent foreign banks from conducting transactions in the country, something that must change in 2015 as part of an agreement with the 10-member Association of Southeast Asian Nations. As of November 2010, 13 foreign lenders had set up representative offices in Myanmar, including 10 from Asean member countries, according to the central bank.

China was the largest foreign-direct investor in Myanmar between from 2007 through 2011, pumping about $19 billion into economy, followed by Thailand and South Korea, according to data on the Central Statistical Organization’s website.

“The currency reform will be positive for overseas companies doing business there,” Roh Dong Hoon, a Seoul-based senior manager at Daewoo International Corp., a trading company involved in a natural gas project in Myanmar, said in a phone interview on March 29. “Last year, the currency strengthened to 700, and it was difficult for some foreign companies there as they earn money in dollars, but have to pay income to local workers in kyat.”

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Aussie, Kiwi Set for Monthly Drops on China Concern

The Australian and New Zealand dollars were set for their first monthly declines this year amid concern a slowdown in the Chinese economy will curb demand for resource exports from the South Pacific nations.

The so-called Aussie was 0.7 percent from a two-month low as swaps traders increased bets the Reserve Bank of Australia will lower interest rates to bolster growth. Australian government debt advanced, with three-year yields poised for their first monthly retreat since November, when the RBA implemented its first rate cut in more than two years.

“For the Aussie, we’ve seen quite a lot of softening in domestic conditions,” said Thomas Averill, managing director in Sydney at Rochford Capital, a currency and interest-rate risk- management company. “We’ve also seen speculation China is slowing, creating a quite compelling case for the RBA to start cutting interest rates.”

The Aussie slipped 0.1 percent to $1.0374 as of 11:39 a.m. in Sydney from the close in New York yesterday, when it touched $1.0305, the lowest since Jan. 17. The New Zealand dollar, known as the kiwi, was unchanged at 81.73 U.S. cents.

The Australian dollar has lost 3.3 percent against the U.S. currency in March, while New Zealand’s currency has fallen 2.1 percent.

China, Australia’s biggest trading partner and New Zealand’s second-largest, is scheduled to release a purchasing managers index for manufacturing on April 1, with economists surveyed by Bloomberg predicting a reading of 50.6 for March, compared with 51 in February. A flash reading of a separate, private gauge came in at 48.1 when it was published on March 22, below the 50 level that divides expansion from contraction.

Rate Outlook
The RBA is scheduled to hold a policy meeting on April 3. It may cut its benchmark rate by 78 basis points over the next 12 months from the 4.25 percent level currently, according to a Credit Suisse Group AG index based on overnight index swap rates.

The Reserve Bank of New Zealand may raise borrowing costs by 23 basis points over the same period, another Credit Suisse index showed. The RBNZ’s key rate is a record low 2.5 percent.

The Australian dollar slid to NZ$1.2671 yesterday, the lowest since Oct. 10. It traded little changed today at NZ$1.2698.

The Aussie’s weakness against the kiwi “is reflecting the narrowing of that interest-rate differential,” said Rochford’s Averill. “There’s much more scope for the RBA to cut than there is for the RBNZ.”

Yields on Australia’s three-year government notes slid four basis points to 3.48 percent. They have fallen 14 basis points in March after climbing 49 basis points in the first two months of 2012.

Two-year interest-rate swaps in New Zealand, which exchange a fixed rate for a floating one, fell to 3.035 percent from 3.05 percent.

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Euro Rises as EU Ministers Boost Crisis Firewall

The euro rose versus the dollar, gaining the most this quarter in a year, after European finance ministers agreed to boost an anti-debt-crisis firewall, adding confidence the region’s financial problems are abating.

The dollar fell against most of its major counterparts as stocks and commodities advanced, boosting demand for higher- yielding assets. The yen erased gains after touching a three- week high against the dollar amid speculation companies are bringing home overseas earnings before the fiscal year ends tomorrow. Sweden’s krona extended a weekly gain as investors pared bets the central bank will cut interest rates.

“The confirmation of an increase in the ceiling of the financial aid funds is one thing that has supported sentiment and supported the euro,” said Nick Bennenbroek, head of currency strategy at Wells Fargo & Co. in New York. “You’re overall seeing the euro move higher.”

The euro rose 0.3 percent to $1.3343 at 5 p.m. in New York, gaining 3 percent this quarter. It reached $1.3386 on March 27, the highest since Feb. 29. The shared currency rose 0.8 percent to 110.56 yen, advancing 11 percent this quarter, the most since the final three months of 2000.

Japan’s currency fell 0.5 percent to 82.87 per dollar after gaining to 81.83, the strongest since March 9.

Kiwi Leads
The New Zealand dollar has gained the most this year against its nine developed-nation counterparts, according to Bloomberg Correlation-Weighted Indexes, rising 3.1 percent. The euro has risen 0.5 percent as the region’s debt crisis abated. The dollar has weakened 2.7 percent, while the yen fell 10.4 percent, its biggest quarterly drop since the third quarter of 1995, the indexes show.

Iceland’s krona and the Argentine peso are the biggest losers against the dollar this year among 25 emerging-market currencies, according to data compiled by Bloomberg. The krona lost 3 percent and the peso has fallen 1.8 percent. The Polish zloty and the Hungarian forint, among the 21 emerging-market currencies that gained against the dollar, have strengthened the most, adding 10.7 and 10.1 percent, respectively.

China’s yuan completed its first quarterly decline since December 2009 after Premier Wen Jiabao set the annual growth target at the lowest level in seven years.

China Currency
The currency rose today before a factory report that is forecast to show a fourth month of expansion. A manufacturing purchasing managers’ index for March to be released on April 1 will show a reading of 50.8, according to the median estimate of economists surveyed by Bloomberg.

The yuan declined 0.06 percent to close at 6.2980 per dollar this quarter in Shanghai, according to the China Foreign Exchange Trade System. The currency strengthened 0.13 percent today, capping a weekly advance of 0.16 percent.

European governments capped fresh rescue lending at 500 billion euros ($666 billion), after a Germany-led coalition opposed a further expansion of the region’s anti-crisis firewall.

Adding the 300 billion euros already committed to Greece, Ireland and Portugal, euro-area finance ministers put the overall size of the firewall at 800 billion euros. In a statement, they ruled out using the 240 billion euros left in the temporary rescue fund to go beyond that.

European Talks
Europe is counting on the sums pledged so far, plus a 1 trillion-euro cash infusion by the European Central Bank into the financial system, to persuade the rest of the world that it is doing enough to keep the two-year-old debt crisis at bay.

“The technical view is friendly for the euro,” Ralf Umlauf, head of floor research at Helaba Landesbank Hessen- Thueringen in Frankfurt, wrote in a note to investors.

The single currency will probably trade in a range between $1.3275 and $1.34, with the next resistance area around the Feb. 24 high of $1.3487, he wrote. Resistance refers to an area where sell orders may be grouped.

Spain, under threat of falling victim to the region’s debt crisis, will raise taxes and slash spending to achieve 27 billion euros ($36 billion) in deficit cuts as it tries to trim its budget gap by a third. The 2012 spending plan seeks to reduce the budget gap to 5.3 percent of gross domestic product from 8.5 percent in 2011, the largest reduction by the measure in at least three decades.

Spain’s Debt
“In terms of the Spanish budget, it doesn’t appear that we’ve gotten any negative surprises there,” Wells Fargo’s Bennenbroek said.

The Thomson Reuters/University of Michigan final index of consumer sentiment for March rose to 76.2 from 75.3 at the end of last month. Economists projected a reading of 74.5 after a preliminary figure of 74.3, according to the median estimate in a Bloomberg News survey.

The Dollar Index (DXY), which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, fell 0.3 percent to 78.949, touching the lowest level since March 1.

Speculation Japanese companies are buying the yen to bring home overseas earnings before the end of the fiscal year also boosted the currency earlier.

“A lot of what we we are seeing with the yen is quarter end flows,” said Mary Nicola, a New York-based currency strategist at BNP Paribas SA. “Now that we are through the 82.50 level, the next resistance would come at 83, but we will most likely hang in this range ahead of the China manufacturing report on Sunday.”

Sweden’s krona strengthened for a third day versus the euro as traders trimmed bets the Swedish central bank will reduce borrowing costs this year.

December futures on the Riksbank’s key rate are at 1.26 percent, up from 1.17 percent a week ago, suggesting traders are starting to hedge bets the bank will cut once more as the economy improves. Policy makers lowered their benchmark to 1.5 percent last month to stave off a recession.

The krona advanced 0.8 percent to 6.6147 per dollar, and rose 0.4 percent to 8.8261 versus the euro.

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Yen Drops Versus Peers as Tankan Fuels Easing Speculation

The yen slid for a second day against the euro after the Bank of Japan (8301)’s Tankan report showed sentiment failed to improve at the nation’s largest companies, stoking prospects the central bank will boost monetary stimulus.

Japan’s currency weakened versus all of its major peers before a report economists say will show manufacturing picked up in the U.S. in March, undermining demand for haven assets. The euro was within a cent of the strongest in a month against the greenback after European finance ministers increased their crisis bailout fund. Australia’s dollar advanced after a Chinese manufacturing gauge released yesterday unexpectedly rose, easing concern the world’s second-largest economy is slowing.

“The yen should be on the back foot because the Tankan survey was a bit worrying,” said Jane Foley, a senior currency strategist at Rabobank International in London. “The impression given was the Bank of Japan might have to do more.”

The yen lost 0.1 percent to 82.98 per dollar at 8:25 a.m. London time. It slid 0.2 percent to 110.76 per euro, after declining 0.8 percent on March 30. Europe’s 17-nation currency was little changed at $1.3349 after reaching $1.3386 on March 27, the strongest since Feb. 29.

The Tankan index for Japan’s largest manufacturers was unchanged last quarter from minus 4 in December, the BOJ said today in Tokyo. That was less than the median estimate of minus 1 in a Bloomberg News survey of economists. A negative number means pessimists outnumber optimists.

Executives’ Sentiment
Today’s report showed that executives expect the sentiment index to remain negative at minus 3 in June.

“The worse-than-expected Tankan survey seems to be fueling talk that the BOJ will ease policy further,” Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore, said. “This is probably leading to selling of the yen.”

Traders added to bets the yen will weaken against the dollar. The difference in the number of wagers by hedge funds and other large speculators on a decline in the yen versus the U.S. currency compared with those on a gain -- so-called net shorts -- was 67,622 on March 27, compared with net shorts of 25,821 a week earlier, figures from the Commodity Futures Trading Commission show.

Manufacturing Gauges
BOJ policy board members are scheduled to meet April 9-10 and April 27. The central bank held off from expanding asset purchases at its meeting in March. It expanded bond purchases by 10 trillion yen and set a 1 percent inflation goal in February.

The Institute for Supply Management’s factory index for the U.S. probably rose to 53 last month from 52.4 in February, according to the median estimate of economists surveyed by Bloomberg before the report is released today.

An index of Chinese manufacturing climbed to 53.1 last month, the highest since March 2011, the logistics federation and the National Bureau of Statistics said yesterday. The measure has a pattern of rising each March.

The Australian dollar climbed versus all of its major counterparts as signs of an improvement in China’s economy supported the South Pacific nation’s export outlook. China is Australia’s largest trading partner.

“I would strongly suspect that support for the currency will be evident all week in the Australian dollar as shorts get taken off the table,” said Kurt Magnus, executive director of foreign-exchange sales in Sydney at Nomura Holdings Inc. A short is a bet that an asset’s price will fall.

The so-called Aussie added 0.7 percent to $1.0419 and rose 0.8 percent to 86.44 yen.

RBA Policy
The Reserve Bank of Australia will hold a policy meeting tomorrow. While all economists in a Bloomberg poll forecast the central bank will leave its benchmark rate unchanged at 4.25 percent, traders expect a cut of 73 basis points over the coming 12 months, according to a Credit Suisse Group AG index based on overnight index swap rates.

The euro was supported after the region’s finance ministers unveiled a package over the weekend including 500 billion euros in fresh bailout funds on top of 300 billion euros already committed to rescue programs, which together topped the symbolic $1 trillion mark. The total doubles when more than 1 trillion euros lent by the European Central Bank to aid the region’s banks is included.

The euro may weaken to the lower $1.32 level, which is on the conversion line of a weekly ichimoku chart, should it fail to rise above the base line, analysts at Bank of Tokyo- Mitsubishi UFJ Ltd., a unit of Japan’s largest financial group, wrote in a note today. The conversion line was at $1.3231 today, while the base line was at $1.3435, according to data compiled by Bloomberg.

Ichimoku charts are used to predict a currency’s direction by analyzing the midpoints of historical highs and lows. The conversion line plots the sum of the highest high and lowest low during the past nine trading days. The baseline is the same calculation during the past 26 days

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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.”

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Euro Weakens Versus Dollar as Spanish Yields Rise; Aussie

The euro erased gains from an almost one-month high against the dollar as Spanish bond yields rose and the nation’s unemployment increased for an eighth month.

The Dollar Index (DXY) gained for the first time in three days before the Federal Open Market Committee releases minutes of its March meeting, where policy makers raised their assessment of the economy. Australia’s dollar fell after the central bank signaled it may resume cutting interest rates.

“When you look at the peripheral yields, the focus is on Spain, so there’s a subtle risk-aversion bent to the market,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. “It’s a bit of a trigger for euro weakness. The euro has repeatedly failed to break higher, above $1.34.”

The euro was little changed at $1.3318 per euro at 9:22 a.m. New York time, after touching $1.3368, almost the highest since Feb. 29. The U.S. currency added 0.3 percent to 82.32 yen. The euro gained 0.3 percent to 109.62 yen.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. major trading partners, rose 0.2 percent to 78.936.

The Australian dollar weakened versus all of its 16 major counterparts after the Reserve Bank signaled it may resume lowering borrowing costs as soon as next month if weaker-than- expected growth slows inflation.

Aussie Falls
“Overall, the tone was quite dovish,” Lee Sue Ann, a Treasury economist at United Overseas Bank Ltd. in Singapore, said of statement. “Interest-rate expectations are going to fall, and this will continue to weigh on the Aussie dollar.”

Traders expect the RBA will cut its benchmark rate by 79 basis points over the coming 12 months, according to a Credit Suisse Group AG index based on overnight indexed swap rates.

The Aussie declined 0.4 percent to $1.0379, and weakened 0.1 percent to 85.44 yen.

The yield on Spain’s 10-year bonds climbed seven basis points, or 0.07 percentage point, to 5.42 percent. The number of Spanish people registering for jobless benefits increased by 38,769 to 4.75 million, the Labor Ministry said today. The nation’s debt will reach 79.8 percent of gross domestic product this year, up from 68.5 percent last year, the government said today in its 2012 budget plan.

Spain’s Debt
“Accelerated fiscal tightening in Spain, at a time when its export markets are slowing and house prices are still falling, suggests that euro-dollar continues to be overly priced,” said Sebastien Galy, a senior foreign-exchange strategist at Societe Generale SA in New York. “Euro is falling versus its European peers. Euro-dollar should eventually break below $1.30 in the coming weeks.”

The FOMC will release today minutes of its March 13 meeting when policy makers raised their economic assessment while repeating that “exceptionally low” interest rates may be needed through late 2014. Chairman Ben S. Bernanke still said on March 26 that further stimulus may be needed to lower unemployment.

“The minutes could potentially unwind some of the moves we’ve seen in the dollar against the euro, yen and Swiss since Bernanke’s speech last week,” said Aroop Chatterjee, a currency strategist at Barclays Capital Inc. in New York. “After the FOMC statement, the probability of more easing declined and the dollar strengthened. But since then, with Bernanke’s statement’s, the market has gone the other way.”

The dollar is down 2.9 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The euro is little changed and the yen has declined 10 percent.

[Glanteeignile]

Dollar Rises to Week-High Versus Euro as Fed Damps Easing

The dollar rose to a more than one- week high versus the euro as signs of improving U.S. employment support the Federal Reserve’s decision to hold off from increasing monetary accommodation.

The U.S. currency rose against 14 of its 16 major peers ahead of a private report forecast to show gains in employment in March held near the most in two months. The euro fell towards the week low reached yesterday against the yen as European Central Bank officials prepare to meet on policy amid signs of slowing growth. The Australian dollar sank to an 11-week low as data showed the nation had a trade deficit for a second-straight month.

“U.S. monetary policy will stay status quo for the foreseeable future,” said Thomas Averill, managing director in Sydney at Rochford Capital, a currency and interest-rate risk- management company. “The U.S. dollar, particularly against the euro, is a bit of a buy at these levels in the short term.”

The dollar climbed 0.3 percent to $1.3194 per euro at 10:59 a.m. in Tokyo after earlier reaching $1.3189, the strongest since March 22. It lost 0.1 percent to 82.76 yen. Europe’s shared sank 0.4 percent to 109.21 yen after reaching 108.70 yesterday, the lowest since March 23.

“A couple of members indicated that the initiation of additional stimulus could become necessary if the economy lost momentum,” according to the Fed’s March meeting minutes released yesterday in Washington. That contrasts with the assessment at the January meeting, in which some officials saw current conditions warranting additional action “before long.”

Jobs Data
Figures based on payrolls from ADP Employer Services due to be published today may show U.S. employment increased by 206,000 last month, according to the median estimate of economists surveyed by Bloomberg News. That compares with a gain of 216,000 in February, the biggest in two months.

Data from the Labor Department due tomorrow will probably indicate applications for jobless insurance fell to 355,000 in the week ended March 31, the least since April 2008. A separate report on April 6 is projected to show employment rose by more than 200,000 workers for a fourth-consecutive month.

“We are far below maximum employment and are likely to remain there for some time,” San Francisco Fed President John Williams said yesterday in San Diego. “Under these circumstances, it’s essential that we keep strong monetary stimulus in place. The recovery has been sluggish.”

Growth Forecasts
Williams forecast U.S. economic growth of 2.5 percent this year and 2.75 percent in 2013. That compares with estimated gains gross domestic product of 2.2 percent this year and 2.4 percent next year, according to median projections in a Bloomberg poll.

The U.S. dollar will be at $1.31 per euro and 84 yen by the end of 2012, a separate survey of financial companies showed.

The euro fell versus the dollar and yen before ECB policy makers gather for an interest-rate decision today. Officials are expected to keep the bank’s key rate unchanged at 1 percent, according to all 57 forecasters polled before the meeting.

Retail sales in the euro-area probably dropped 0.2 percent in February after a 0.3 percent gain the previous month, according to the median estimate in a separate survey.

“I don’t expect anything new out of the ECB meeting,” Rochford’s Averill said. “The European economy is struggling in comparison to the U.S. I think there’s very little economic reason for the euro to appreciate against the U.S. dollar.”

Australia Trade
The euro has lost 0.7 percent in the past week, the second- worst performance after the Australian dollar among the 10 developed-nation currencies tracked by Bloomberg Correlation- Weighted Indexes.

Australia’s dollar slid 0.5 percent to $1.0277 and touched $1.0268, the weakest since Jan. 16. New Zealand’s currency fell 0.3 percent to 81.68 U.S. cents. The MSCI Asia Pacific Index of shares lost 1 percent.

Australia’s imports outpaced exports by A$480 million ($493 million), from a revised A$971 million deficit in January, the Bureau of Statistics said in Sydney today. The median estimate in a Bloomberg survey was for a surplus of A$1.1 billion.

[Glanteeignile]

Euro Drops as Demand Falls at Spain Sale, ECB Keeps Rate at 1%

The euro weakened for a third day against the dollar after demand declined at a Spanish bond auction, adding to concern the region is struggling to overcome its sovereign debt crisis.

Europe’s shared currency fell to a three-week low against the yen as the European Central Bank kept its main refinancing rate at a record low 1 percent. The yen and dollar strengthened against all of their other major counterparts as stocks slid around the world, boosting demand for the relative safety of the Japanese and U.S. currencies. The Australian dollar fell to an 11-week low versus the greenback after the nation unexpectedly reported a trade deficit.

“The euro should continue to weaken,” Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London, said before the ECB rate decision. “The questions over the periphery continue to be very large,” he said, referring to Europe’s high debt and deficit nations.

The euro depreciated 0.6 percent to $1.3152 at 12:46 p.m. London time after dropping to $1.3141, the weakest since March 22. The shared currency dropped 1.2 percent to 108.33 yen. It earlier fell to 108.07, the lowest since March 13. The yen advanced 0.5 percent to 82.36 per dollar.

Spain sold 2.59 billion euros of bonds, less than its maximum target of 3.5 billion euros, the central bank said. Demand for the notes due in 2015 was 2.41 times the amount allotted, down from 4.96 when they were last sold in March.

Record Debt
The auction was the first since Budget Minister Cristobal Montoro presented the government’s spending plans on March 30 and said public debt will rise to a record 79.8 percent of gross domestic product even as the nation makes the deepest cuts in three decades.

Spanish 10-year bond yields rose as much as 26 basis points to a 12-week high of 5.71 percent. The Stoxx Europe 600 Index (SXXP) dropped 1.1 percent.

The ECB’s decision to leave the refinancing rate unchanged was forecast by all 57 economists in a Bloomberg News survey. ECB President Mario Draghi will hold a press conference at 2:30 p.m. Frankfurt time to explain the decision.

“What Draghi is going to tell us is that the ECB is still extremely concerned about prospects for the euro-area economy,” Paul Robinson, London-based global head of foreign-exchange research at Barclays Plc said on Bloomberg Television’s “The Pulse” with Maryam Nemazee. “Loose monetary policy is not likely to change any time soon, and that, to some extent contrasts with” the Federal Reserve.

Europe ‘Struggling’
The euro rose 1 percent against the dollar after the previous ECB policy meeting on March 8, when Draghi said recent economic surveys showed signs of stabilization. The ECB supplied more than 1 trillion euros into the euro-region banking system in two offerings of three-year loans in December and February.

“The European economy is struggling in comparison to the U.S.,” said Thomas Averill, managing director of Rochford Capital in Sydney. “There’s very little economic reason for the euro to appreciate against the U.S. dollar.”

The dollar rose against all of its 16 major counterparts except the yen as signs the U.S. economy is improving added to speculation the Federal Reserve will refrain from further measures to cap borrowing costs.

A report from ADP Employer Services today will show U.S. employment increased by 206,000 last month, according to a Bloomberg News survey. That compares with a gain of 216,000 in February, the biggest in two months.

The euro has declined 0.9 percent in the past week, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar gained 0.5 percent.

Aussie Falls
Australia’s dollar dropped after the central bank said imports outpaced exports by A$480 million in February. The median estimate in a Bloomberg survey of economists was for a surplus of A$1.1 billion.

“The Australian dollar remains under downward pressure reflecting the ongoing underperformance of the Australian economy,” said Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. Today’s data show “weakness in export growth,” he said.

The so-called Aussie slid 0.6 percent to $1.0272 after falling to $1.0244, the weakest since Jan. 13.

[Glanteeignile]

Aussie, N.Z. Dollars Fall Versus Yen as Asia Stocks Drop

The Australian and New Zealand dollars declined for a second day against the yen as Asian stocks extended a global rout, sapping demand for higher- yielding currencies.

The so-called Aussie was 0.2 percent from a six-month low versus the New Zealand dollar as swaps traders increased bets the Reserve Bank of Australia will cut interest rates next month. The New Zealand currency maintained a two-day slide against the dollar after a fall in demand for Spanish notes rekindled concern Europe’s prolonged debt crisis will hamper global growth.

“The drop in stocks is weighing on the Australian and New Zealand dollars,” said Takuya Kawabata, a researcher at Gaitame.com Research Institute Ltd. in Tokyo, a unit of Japan’s largest currency-margin company. “The Australian dollar is likely to remain soft because of speculation about rate cuts.”

The Aussie fell 0.2 percent to 84.56 yen as of 12:49 p.m. in Sydney from the close in New York yesterday. It was at $1.0285 from $1.0270. New Zealand’s dollar, nicknamed the kiwi, declined 0.1 percent to 67.12 yen. It traded at 81.63 U.S. cents after having dropped 0.5 percent to 81.48 yesterday.

The Australian dollar was little changed at NZ$1.2599. It touched NZ$1.2576 yesterday, the weakest since Oct. 6. Financial markets in Australia and New Zealand will be closed from tomorrow for holidays and will reopen on April 10.

The MSCI Asia Pacific Index of shares lost 0.6 percent after the MSCI All-Country World Index (MXWD) dropped 1.9 percent yesterday, the biggest slide since March 6.

RBA Rates
Traders see an 89 percent chance that the RBA will lower its benchmark interest rate to 4 percent from 4.25 percent at its next meeting on May 1, according to a Credit Suisse Group AG index based on overnight index swap rates. Yields on Australia’s three-year notes declined as much as six basis points to 3.38 percent, the lowest since Feb. 7.

The RBA said on April 3 that its board “thought it prudent to see forthcoming key data on prices to reassess its outlook for inflation, before considering a further step to ease monetary policy.” The central bank left the overnight cash-rate target unchanged.

The Australian and New Zealand dollars dropped yesterday as demand for riskier assets was curbed after Spain sold 2.59 billion euros ($3.4 billion) of bonds, less than its maximum target of 3.5 billion euros. The nation’s government debt slumped, with five-year yields climbing 25 basis points, the most since Dec. 8. Prime Minister Mariano Rajoy said Spain’s situation is one of “extreme difficulty.”

An index for service industries in China, Australia’s biggest trading partner and New Zealand’s second largest, fell to 53.3 last month from 53.9 in February, figures from HSBC Holdings Plc and Markit Economics showed today. Their gauge for the country’s manufacturing sector dropped to 48.3 in March from 49.6 the prior month. Figures below 50 indicate contraction.

[Glanteeignile]

Dollar Falls as Payrolls Trail Forecast, Adding Fed Bets

The dollar fell against the yen and euro after U.S. employers added fewer jobs than forecast in March, reviving bets the Federal Reserve will increase stimulus, or quantitative easing, which may debase the currency.

The 17-nation euro headed for the biggest weekly drop in 11 months against the yen as Spain’s rising borrowing costs fueled concern that the region is failing to contain its debt crisis. Currencies of commodity-exporting countries fell as speculation the U.S. economic recovery is faltering overshadowed the prospect of further Fed easing. The currencies of Mexico and Canada, whose biggest trade partner is the U.S., weakened.

“Dollar-yen is trying its best to do a nose dive,” said Sebastien Galy, a senior foreign-exchange strategist at Societe Generale SA in New York. “The payrolls number will reinforce people looking for the quantitative-easing argument.”

The dollar weakened 1 percent to 81.54 yen at 10:01 a.m. in New York, touching the lowest level since March 8. It fell 0.2 percent to $1.3085 per euro. The shared currency lost 0.9 percent to 106.69 yen, extending its weekly decline to 3.5 percent, the most since May.

Futures on the Standard & Poor’s 500 Index fell 1.1 percent. Australia’s dollar was little changed at $1.0303 and South Africa’s rand fell 0.6 percent to 7.8839 per dollar.

Jobs Data
Nonfarm payrolls increased by 120,000 last month, the smallest increase in five months, the Labor Department reported today. Economists had forecast an addition of 205,000, according to the median of 75 estimates in a Bloomberg News survey. The unemployment rate fell to 8.2 percent, the lowest since January 2009.

The Dollar Index (DXY), which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six U.S. major trading partners, lost 0.3 percent to 79.855.

Mexico’s peso fell the most against the dollar among the 16 major currencies tracked by Bloomberg, dropping 1.1 percent to 13.0174. Canada’s dollar weakened 0.4 percent to 99.68 cents per U.S. dollar.

While the Federal Open Market Committee, led by Chairman Ben S. Bernanke, has pledged to keep its interest rate at a record low of zero to 0.25 percent through 2014, it’s holding off on increasing monetary accommodations unless the U.S. economic expansion falters or prices rise at a rate slower than its 2 percent target, according to minutes of the central bank’s March 13 meeting released April 3.

Fed View
“It’s not a green light for Mr. Bernanke to announce QE3 tomorrow, but it certainly says that the conditions under which some FOMC members will be pushing the case for further easing measures are falling into place,” said Ray Attrill, a senior currency strategist at BNP Paribas SA in New York.

The Fed bought $2.3 trillion of securities in two rounds of quantitative easing from December 2008 to June 2011.

Spain, the euro-region’s fourth-largest economy, is in “extreme difficulty,” Prime Minister Mariano Rajoy said April 4, raising the possibility of a bailout for the second time this week. Spanish bonds fell yesterday, pushing the yield on the 10- year benchmark bond to as high as 5.84 percent today, the most since December, and widening the spread with similar-maturity German bunds to more than 4 percentage points.

The yield on Spain’s 10-year benchmark bond has jumped nearly one percentage point since March 2, when Rajoy announced the government would miss its budget-deficit target this year. He warned that public debt will surge to a record 79.8 percent of GDP this year as it imposes the deepest austerity in at least three decades.

European Conditions
German exports probably decreased 1.2 percent in February from January, when they rose 2.4 percent, according to the median estimate of economists surveyed by Bloomberg News before the report due on April 10. In France, output increased 0.2 percent in February, after gaining 0.3 percent the prior month, another poll showed before the nation’s statistics office releases data the same day.

The euro has declined 1.2 percent in the past week, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen has gained 2.8 percent and the dollar has appreciated 1 percent.

Markets in Hong Kong, Australia, New Zealand, Singapore and India are closed today for a public holiday.

[Glanteeignile]

Yen Gains on Japan Current-Account Surplus; Euro Falls

The yen rose against all of its major peers as data showing Japan returned to a current-account surplus and tensions over a North Korean rocket launch bolstered the allure of the currency as an investment haven.

The euro touched a one-month low versus the Japanese currency before a German report that may show exports declined in February. The dollar weakened against the yen before data this week that may show inflation in the U.S. eased. The Swiss franc strengthened above the 1.20 ceiling against the euro imposed by the nation’s central bank, spurring speculation the country will intervene to weaken the currency.

“The markets will likely remain risk-aversive, and the yen may continue to be bought as a haven,” said Toshiya Yamauchi, a senior analyst in Tokyo at Ueda Harlow Ltd., which provides currency margin-trading services. “People are focused on downside risks to the European economy, and the situation is unlikely to turn around.”

The yen climbed to 106.18 per euro, the strongest since March 7, before trading at 106.42 as of 2:07 p.m. in Tokyo, 0.4 percent higher than the close at the end of last week. Japan’s currency added 0.2 percent to 81.44 per dollar after reaching 81.20 earlier, the strongest since March 8. The euro slid 0.2 percent to $1.3067.

Markets in Australia, New Zealand and the U.K. are closed today for a public holiday.

Japan had a 1.18 trillion yen ($14.4 billion) surplus in its February current account, the widest measure of trade, government data showed today. That was after a record deficit in the January account and compared with the surplus of 1.12 trillion yen estimated by economists.

Nuclear Test
North Korea appears to be in the final stages of preparations for an underground nuclear test to follow a long- range rocket launch scheduled for as early as this week, according to a report compiled by South Korean intelligence officials. The rocket launch must be canceled “immediately” because it threatens peace and security in the region, South Korea’s Foreign Ministry said in a statement yesterday.

The yen tends to strengthen during economic and geopolitical turmoil because Japan’s current-account surplus makes it less reliant on foreign capital.

Weakening Economy
Exports from Germany, the euro area’s biggest economy, probably decreased 1.2 percent in February from the prior month, when they rose 2.4 percent, a Bloomberg News survey of economists showed before the report due tomorrow.

“The European economy is weak,” said Kumiko Gervaise, an analyst in Tokyo at Gaitame.com Research Institute Ltd., a unit of Japan’s largest online currency margin-trading company “The German economy is getting weaker than before. Bad data from Germany may contribute to euro weakness.”

U.S. consumer prices advanced 0.3 percent last month after climbing 0.4 percent in February, according to a separate survey of economists taken before the Labor Department’s April 13 release. The Labor Department reported last week that nonfarm payrolls increased by 120,000 last month, the smallest gain in five months.

The Federal Reserve has pledged to keep its key interest rate at a record low range of zero to 0.25 percent through 2014. It will hold off on increasing monetary accommodation unless the U.S. economic expansion falters or prices rise at a rate slower than its target, according to minutes of the central bank’s March 13 meeting released April 3.

The central bank bought $2.3 trillion of securities in two rounds of so-called quantitative easing from December 2008 to June 2011 to stimulate the economy through lower borrowing costs.

Ichimoku Chart
The dollar may weaken this week to upper 80-yen levels, which are on the conversion line of its weekly ichimoku chart and the top line of the so-called cloud, analysts at Bank of Tokyo-Mitsubishi UFJ Ltd. wrote in a note today. The conversion line stood at 80.77, while the upper end of the cloud was at 80.68, according to data compiled by Bloomberg.

The yen has weakened almost 5 percent against the dollar since the Bank of Japan (8301) set a 1 percent inflation goal on Feb. 14 and increased its planned purchases of government bonds. The BOJ starts a two-day policy meeting today.

The quarterly Tankan survey from the BOJ last week showed no improvement in sentiment among large manufacturers. At its March 13 meeting, the BOJ board voted down a proposal from one of the members, Ryuzo Miyao, to expand the central bank’s asset- purchase fund to ease policy further.

‘Favoring Further Easing’
“With Japan’s Tankan survey surprising to the downside and political pressure rising, other board members may soon consider joining Miyao-san in favoring further easing,” Mansoor Mohi- uddin, the Singapore-based chief currency strategist at UBS AG, wrote in an e-mailed note on April 7.

Futures traders remained the most bearish on the yen in more than four years, according to figures from the Washington- based Commodity Futures Trading Commission. The difference in the number of wagers by large speculators on a decline in the yen against the dollar compared with those on a gain was 65,108 on April 3. So-called net shorts reached 67,622 the previous week, the most since July 2007.

The Swiss franc appreciated to as much as 1.19962 per euro today, the strongest since the Swiss National Bank set the limit on Sept 6. The SNB won’t allow the franc to rise above the ceiling and is ready to buy foreign currencies in “unlimited quantities,” spokesman Walter Meier said on April 5.

“We believe the SNB is serious in its commitment to maintain the floor and will aggressively defend it,” Yuki Sakasai and Aroop Chatterjee, currency strategists at Barclays Capital, wrote in a research note on April 6. The Swiss franc is “an attractive funding currency for risky asset positions.”

[Glanteeignile]

Singapore’s MAS to Hold Currency-Gain Pace, Survey Shows

The Monetary Authority of Singapore will maintain the current pace of appreciation of the city state’s currency on speculation consumer-price gains will limit the authority’s scope to ease policy, analysts said.

Officials will hold the current rate of the local dollar’s advance and refrain from altering its trading band, according to 20 of 21 financial companies surveyed by Bloomberg News. One said there is a 50 percent chance the central bank will either keep its stance unchanged or increase the band’s slope to levels prior to its last review in October. The government will announce the currency decision on April 13, the same day it releases preliminary gross domestic product data.

Core inflation is “proving to be more persistent,” Khoon Goh, a Singapore-based senior currency strategist at ANZ National Bank, wrote in an e-mailed response to questions. “We see the MAS maintaining the current appreciation slope to keep inflation within target.”

The MAS is forecast to join central banks from Australia to Thailand, which refrained from raising benchmark rates this month and last as they weigh inflation risks. Economists predict policy makers in Indonesia and South Korea will also hold borrowing costs when they gather this week.

Singapore’s central bank uses the exchange rate rather than borrowing costs to conduct monetary policy, adjusting the pace of appreciation or depreciation against an undisclosed trade- weighted band of currencies by changing the slope, width and center of the band. A flatter slope allows slower appreciation or depreciation over time.
Core Inflation

The MAS announced a reduction to the slope of its policy band on Oct. 14, citing an “expected moderation in core inflation.” It tightened monetary conditions at each of its previous three gatherings.

Costs in the economy have been more persistent, and the MAS is “very concerned” about prices, Minister for Trade and Industry Lim Hng Kiang said yesterday. The authority doesn’t have a formal inflation target, Lim said, speaking in parliament.

The city state’s consumer price index rose 4.6 percent in February from a year earlier, after climbing 4.8 percent in January, the Department of Statistics said March 23.

The core inflation rate, which excludes accommodation and private transportation costs, was 3 percent. The measure may be about 3 percent in the next few months, the central bank and trade ministry said in a monthly statement on price trends released on the same day.

Singapore’s dollar traded at S$1.2612 against its U.S. counterpart as of 6:53 a.m. local time, up from this year’s low of S$1.3006. The median forecast shows the currency may advance to S$1.25 by June 30 and strengthen to S$1.23 by year-end.

It has appreciated 2.8 percent since Dec. 31, the fourth-biggest gain against the U.S. dollar among the most-traded currencies. In 2011, the Singapore dollar gained 1 percent versus the greenback and advanced against 10 of 16 major peers.

The economy probably rebounded from a contraction, growing 7 percent in the first quarter from the previous three months, according to the median of 11 estimates in a separate Bloomberg survey.

[Glanteeignile]

Aussie Rises as Asian Stocks Gain Amid Talk of BOJ Easing

Australia’s dollar strengthened against the yen before the Bank of Japan (8301) concludes a policy meeting amid speculation the central bank may add stimulus measures this month.

The so-called Aussie trimmed earlier losses as Asian stocks rose and business conditions improved, boosting demand for riskier assets. Gains in the Australian and New Zealand dollars was limited before data which may show growth slowing in China.

“If you are long yen, then you would probably reduce some of that ahead of Bank of Japan decision,” said Thomas Harr, the Singapore-based head of Asian foreign-exchange strategy at Standard Chartered Plc. “There’s always a risk that the BOJ could do something. Risk appetite seems to be stabilizing to some extent and that is lifting the Aussie.”

Australia’s dollar rose 0.2 percent to $1.0337 as of 12:25 p.m. in Sydney from yesterday’s close in New York. The Aussie advanced 0.5 percent to 84.48 yen. New Zealand’s currency was at 82.32 U.S. cents from 82.16 yesterday. The so-called kiwi gained 0.5 percent to 67.27 yen.

The MSCI Asia Pacific Index (MXAP) of stocks rose 0.2 percent while the Nikkei 225 Stock Average climbed 0.9 percent.

Morgan Stanley MUFG Securities Co., Mizuho Securities Co. and SMBC Nikko Securities Inc. forecast that the BOJ will expand asset purchases at a meeting on April 27, according to a survey by Bloomberg News. Twelve of 13 economists surveyed by Bloomberg have said they expect the BOJ to keep accommodative policies unchanged at the two-day meeting concluding today.

Eyes on BOJ
‘All eyes are now on today’s BOJ decision as easing hopes are fanned by a number of recent events,’’ Cameron Umetsu, an economist at UBS AG, wrote in a research note today. BOJ easing “would still boast the potential to put the yen on the defensive.”

Australian business confidence advanced in March as the global economic outlook improved and the local currency weakened by the most in six months, a private survey showed. The confidence index rebounded to 3 last month from a five-month low of 1 in February, a National Australia Bank Ltd. (NAB) survey of about 400 companies taken March 26-30 and released in Sydney today showed.

The yen has fallen 0.5 percent today, the worst performance among 10 currencies tracked by Bloomberg Correlation-Weighted Indexes. The kiwi is little changed, while the Australian dollar has risen 0.1 percent.

In China, imports probably rose 9 percent in March from a year earlier, after a 39.6 percent jump in February, according to median estimate of economists surveyed by Bloomberg News before the data today. China, Australia’s biggest trading partner and New Zealand’s second largest, posted the widest trade gap in February since at least 1989 as exports increased less than expected and imports surged.

“Any signs of weakness in the Chinese data today, or any concern about a slowdown in China, will weigh on the Aussie,” said Janu Chan, an economist at St. George Bank Ltd. in Sydney.

[Glanteeignile]

Baht gains on fund flows

Thailand's baht on Tuesday rose to its strongest level in almost a week after global investors put money into the country's assets on optimism the economy will recover from last year's floods.

International funds purchased US$2.8 billion more Thai equities than they sold this year, according to exchange data.

Consumer confidence rose for a fourth straight month in March, a report from the University of the Thai Chamber of Commerce showed this month.

Exports (THNFEXPY) increased 1.2 per cent in February from a year earlier, halting four months of decreases, Bank of Thailand data showed on March 30.

"With plenty of liquidity in the developed nations, funds will flow into emerging Asia," said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc in Tokyo. "Thailand's exports are showing signs of recovery and that is quite positive for the baht."

The baht advanced 0.3 per cent from April 5 to 30.93 per dollar as of 8.28am in Bangkok, according to data compiled by Bloomberg. It touched 30.90 earlier, the strongest level since April 4. Local financial markets were closed for a public holiday on April 6 and yesterday.

One-month implied volatility, a measure of foreign-exchange swings used to price options, was unchanged at 4.52 per cent.

The yield on the government's 3.25 per cent bonds due June 2017 climbed two basis points, or 0.02 percentage point, to 3.69 per cent, according to data compiled by Bloomberg.

[Glanteeignile]

Baht gains, public debt up



Public Debt Management Office chief Chakkrit Parapuntakul said the outstanding public debt as of January 31 totalled 4.36 trillion baht, or 41.06 per cent of gross domestic product.

Of the total public debt, 3.12 trillion baht was the debt directly acquired by the government and 1.08 trillion baht was debts owned by state enterprises that are financial institutions, and the remaining 167.27 billion baht was debt incurred by the non-financial institution state enterprises, Mr Chakkrit said.

The public debt had increased from the previous month, December, by 64.46 billion baht, he said.

The debt owned by the government went up by 28.66 billion baht, the debt of financial institution state owned firms by 16.89 billion baht and non-financial institution state enterprises by 18.91 billion baht, he added.

[Glanteeignile]

Top Forecasters See Euro Weakness Returning on Spain

The most-accurate foreign-exchange forecasters say the euro will slide as austerity-driven spending cuts from Spain to Italy reignite debt turmoil and drag the region into recession.

Nick Bennenbroek, head of currency strategy at Wells Fargo & Co., who topped the list for the fourth time out of the past six quarters according to data compiled by Bloomberg, expects the euro to drop more than 5 percent to $1.24 at the end of 2012. Westpac Banking Corp., which had the second-lowest margin of error, predicts $1.26.

The euro’s biggest quarterly gain in a year will prove fleeting. The economy faces “downside risks” amid rising Spanish and Italian borrowing costs, European Central Bank President Mario Draghi said on April 4. The benefits of record ECB loans to local banks, which helped drive yields down from euro-era records, are fading and the region faces recession, while the U.S. expands at the fastest pace in two years.

“One of the reasons the euro gained was that we saw some progress in the European debt crisis and some improvement in European bond markets, and we’re near the end of that,” Bennenbroek said in a telephone interview in New York on April 2. “The euro will weaken further as slow to no growth weighs on sentiment and as ECB actions continue to weigh.”

The euro weakened 0.3 percent to $1.3064 at 11:11 a.m. London time, and slid 0.7 percent to 106.10 yen. The dollar fetched 81.19 yen from 81.49 yesterday.

First Quarter Gain
The 17-nation currency strengthened 2.95 percent in the first quarter as the European Union arranged a second bailout package for Greece after the nation negotiated a debt-swap with its private-sector investors, and as the ECB provided a record amount of loans to the region’s banks. The actions reduced investor concern that the crisis would spread.

Austerity measures across the region are driving the economy into a recession, spurring concern the ECB may introduce further easing measures, according to Richard Franulovich, a senior currency strategist at Westpac in New York.

“Europe’s going through deleveraging, austerity, and growth is very poor,” he said in an April 3 telephone interview. “So you have a situation where the ECB could be easing and the Fed is basically on hold, and that should mean interest-rate differentials move in the dollar’s favor.”

Rise to Resume
The next three most-accurate forecasters see euro gains continuing. Jane Foley, a London-based senior currency strategist at Rabobank International and the fifth-most accurate, said the euro may rise as the Federal Reserve keeps interest rates at a record low and the U.S. moves to cut its budget deficit after presidential elections in November.

Employers in the U.S. added 120,000 jobs in March, the fewest in five months, Labor Department figures showed on April 6 in Washington. The March increase was less than the most pessimistic forecast in a Bloomberg News survey, in which the median estimate called for a 205,000 gain. Unemployment declined to 8.2 percent, the lowest since January 2009, from 8.3 percent.

“The labor market recovery is still slow and the unemployment levels very high,” Foley said in a telephone interview on April 3. “If there is any degree of fiscal cleanup after the election, then that will be a drag on growth and monetary policy will have to remain accommodative for longer.” The euro will probably trade at $1.35 in nine months and climb to $1.40 a year from now, she said.

JPMorgan Chase & Co. and Oversea-Chinese Banking Corp., the third and fourth most-accurate forecasters, predict the euro will appreciate to $1.36 and $1.35, respectively, by year end.

Euro Support
“We will not be explicitly expecting another meltdown” for the euro, Emmanuel Ng, a currency strategist at OCBC in Singapore, said by telephone yesterday. “We still expect risk for the euro to be on the downside.” Ng said he predicts the euro will be at $1.30 at the end of June.

Europe’s common currency will remain supported as Spain and Italy are unlikely to require financial aid and the U.S. isn’t growing fast enough for the Fed to start raising interest rates, according to John Normand, head of currency strategy at JPMorgan, the biggest U.S. lender.

“There are enough mechanisms to allow countries like Spain and Italy to retain market access even if they may have to roll over debt at higher interest rates for a period,” London-based Normand said in a telephone interview April 5. “It’s difficult to look at the balance of data emerging from the U.S. and conclude that the Fed will prepare the ground for rate hikes.”