The dollar and yen strengthened after Japan reported a wider-than-estimated trade deficit in July, underlining the fragility of the global economy and boosting demand for safer assets.
The U.S. currency rose the most against the South African rand and South Korean won after Federal Reserve Bank of Chicago President Charles Evans described a weakening in global trade as “awful.” The euro pared losses against the dollar as Luxembourg Prime Minister Jean-Claude Juncker travels to Greece to discuss the nation’s austerity plans. Australia’s dollar fell as stock declines sapped demand for for higher-yielding assets.
“We’ve had the disappointing Japanese trade data and the dollar is a bit stronger,” said Jane Foley, a senior currency strategist at Rabobank International in London. “The Fed minutes will be closely watched. The dollar will come down if they signal that they will take action.”
The U.S. currency rose 0.2 percent to $1.2446 per euro at 7:22 a.m. New York time after falling to $1.2488 yesterday, the weakest level since July 5. The yen climbed 0.3 percent to 98.60 per euro. The dollar was little changed at 79.29 yen.
The greenback appreciated 0.5 percent against the rand and 0.4 percent versus the so-called Aussie. The Dollar Index, which IntercontinentalExchange Inc. (ICE) uses to track the U.S. currency against those of six major trading partners, gained 0.2 percent to 82.018.
Japan Deficit
Japan’s trade deficit was 517.4 billion yen last month, following a revised 60.3 billion yen surplus in June, the Finance Ministry said in Tokyo. The median forecast in a Bloomberg News survey of economists was for a shortfall of 270 billion yen. Exports fell 8.1 percent from a year earlier, compared with an estimated 2.9 percent decline.Purchasing managers reports tomorrow are forecast to show contraction in German and French manufacturing, with the measure for the euro-area as a whole also predicted to shrink, according to surveys conducted by Bloomberg News.
The dollar has advanced 7.2 percent in the past 12 months, the best performance of the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen gained 1.8 percent, and the euro weakened 8.2 percent.
The euro trimmed declines today on speculation Germany will support Greece as it struggles to contain its debt crisis. A senior lawmaker with German Chancellor Angela Merkel’s party, Norbert Barthle, said concessions were possible for Greece as long as Prime Minister Antonis Samaras shows a willingness to meet the main targets set out in his country’s bailout program.
‘More Air’
“All we want is a little more air to breathe to get the economy going and increase government revenue,” Samaras was quoted as saying in an interview with Germany’s Bild newspaper today. “More time doesn’t necessarily mean more money.”The Greek leader will meet Juncker in Athens today and then travel to Berlin and Paris on Aug. 24 and 25.
“The focus is on Greece,” said Valentin Marinov, head of G-10 currency strategy at Citigroup Inc. (C) in London. The euro’s resilience “reflects optimism that a workable solution may be found to its problems.”
The Fed is scheduled to release the minutes of its July 31- Aug. 1 policy meeting today, at which officials refrained from adding new stimulus measures that tend to debase the greenback.
The U.S. central bank bought $2.3 trillion of mortgage and Treasury debt between 2008 and 2011 in two rounds of quantitative easing to cap borrowing costs. Policy makers have held the Fed’s key rate in a range of zero to 0.25 percent since 2008 and plan to keep it there at least through late 2014.
The Dollar Index may find so-called support at around 81.5 ending recent declines, according to Derek Mumford, a director in Sydney at Rochford Capital, a currency risk-management company. “That will contain any sell off at the moment,” he said. Support refers to an area on a chart where orders to buy may be clustered.
Australia’s currency declined 0.5 percent to $1.0439, and dropped 0.5 percent to 82.72 yen.
Source: Bloomberg
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