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Dollar Near One-Year High Against Euro on U.S.

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Green Money 00   Monday, 09/01/14 07:34:25 AM
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Dollar Near One-Year High Against Euro on U.S. Economy, Ukraine
Bloomberg
By Mariko Ishikawa and Kristine Aquino 7 hours ago

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The dollar reached the highest level in almost a year against the euro as signs of U.S. economic growth and tensions in Ukraine boosted demand for the currency.

The euro held losses against its 16 major peers from last month after completing a seven-week slide, the longest stretch in more than a decade. A manufacturing index today may add to the case for the European Central Bank to expand stimulus. Australia's dollar remained lower as a report showed manufacturing slowed in China, its biggest trading partner. New Zealand's dollar reversed a loss after a trade index climbed.

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"Data out of the U.S. has been pretty good," said Thomas Averill, a managing director in Sydney at Rochford Capital, a currency and rates risk-management company. "One of the big reasons why euro-dollar is going down is we've got talk of tightening coming out of the Federal Reserve and the opposite kind of talk coming out of Europe."

The dollar added 0.1 percent to $1.3120 per euro at 12:55 p.m. in Tokyo from Aug. 29, after earlier touching $1.3119, the strongest since Sept. 6. The euro declined 0.8 percent last week in the longest stretch of losses since December 1999.

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The euro traded at 136.67 yen, after falling 0.7 percent to 136.69 yen in August. The greenback rose 0.1 percent to 104.17 yen from 104.09 on Aug. 29, when it capped a 1.3 percent monthly gain. U.S. markets are closed for the Labor Day holiday.
Bearish Bets

Hedge funds and other large speculators increased bets on declines in the euro against the dollar to the most since July 2012. The difference in the number of wagers on a decline compared with those on a gain -- so-called net shorts -- was 150,657 on Aug. 26, according to data from the Washington-based Commodity Futures Trading Commission.

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Demand for the euro was limited after pro-Russian rebels attacked two Ukrainian coast-guard vessels for the first time, just hours after European Union governments agreed to impose new sanctions on Russia if the conflict worsens. Fighting in southeast Ukraine continued yesterday and the situation there remains "tense," according to military officials in Kiev.

"The geopolitical theme in general is supportive of the U.S. dollar bull tone," Rochford's Averill said.

The euro may fall toward $1.30 this week and find support around that level, Averill said. Support is an area where there may be orders to buy.

The Markit Economics final August index of euro-area manufacturing probably fell to 50.8, the lowest level since July 2013, according to the median estimate of economists surveyed by Bloomberg News before the data today. Readings exceeding 50 indicate expansion.
ECB Meeting

The ECB will hold a policy meeting on Sept. 4. It may embark on quantitative easing this year or next, according to 44 percent of respondents in a Bloomberg survey last month.

"We expect ECB President Draghi's statement to be scrutinised for hints regarding the thresholds for Quantitative Easing," Mitul Kotecha, the Singapore-based head of Asia-Pacific foreign-exchange strategy at Barclays Plc, wrote in an e-mailed note to clients today. "Although Draghi will sound dovish, policy inaction may give the EUR some limited, albeit short-lived, relief."

In the U.S., economists in a separate survey estimate Markit's final August manufacturing Purchasing Managers' Index probably rose to 58, the highest since April 2010. The index is due tomorrow.
Economic Surprise

The Citigroup Economic Surprise Index for the U.S. climbed to 34.60 last week, the most since Jan. 31. A positive number means data releases have been stronger than expected. The Fed is on pace to end its monthly asset purchases in October.

The dollar rose 1 percent in the past month, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-nation currencies. The euro slid 1.6 percent, the biggest drop within the group, while the yen fell 0.7 percent.

Australia's dollar held losses after China's PMI (CPMINDX) fell to 51.1 in August from 51.7 in July, according to the National Bureau of Statistics and China Federation of Logistics and Purchasing. A final reading of a separate gauge by HSBC Holdings Plc and Markit Economics showed a decline. China is the biggest trading partner for Australia and New Zealand.

Home prices across Australia's state and territory capitals recorded the biggest winter gain since 2007, according to the RP Data-Rismark Home Value Index.

The Reserve Bank of Australia meets tomorrow. All 31 economists polled by Bloomberg expect the policy makers to keep cash rate unchanged at record low 2.5 percent.

Statistics New Zealand said in Wellington today the terms of trade index, which measures the price of exports relative to imports, rose 0.3 percent in the second quarter from the previous three-month period. Economists surveyed by Bloomberg expected a 3.5 percent decline.

The Aussie dollar was unchanged at 93.39 U.S. cents after falling 0.2 percent at the end of last week. New Zealand's kiwi gained 0.1 percent to 83.73 U.S. cents from 83.62 on Aug. 29, after declining as much as 0.2 percent.

To contact the reporters on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net

To contact the editors responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net Naoto Hosoda, Jonathan Annells

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