The dollar fell to the lowest in almost six weeks against the yen before the Federal Reserve starts a two-day meeting tomorrow amid speculation it will buy bonds to boost the economy in a third round of so-called quantitative easing. New Zealand’s dollar strengthened against all of its 16 major peers as Fitch Ratings affirmed the nation’s AA rating. The zloty led gains among emerging-market currencies versus the dollar after JPMorgan Chase & Co. raised its view on the Polish currency.
Sept. 11 (Bloomberg) -- Neil
Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd.,
discusses the outlook for the euro, Federal Reserve monetary policy and
expectations for tomorrow's ruling by the German Federal Constitutional
Court on the European Stability Mechanism.
He speaks with Mark Barton on Bloomberg Television's "Countdown."
(Source: Bloomberg)
The 17-nation shared currency gained 0.2 percent to $1.2779 at 7:32 a.m. New York time. It earlier touched $1.2819, the highest since May 22. The euro dropped 0.2 percent to 99.66 yen. The dollar slipped 0.4 percent to 77.99 yen after dropping to 77.96, the weakest since Aug. 1.
The Federal Constitutional Court is due to decide tomorrow on Germany’s participation in the European Stability Mechanism, a 500 billion-euro fund that offers loans to member states and may buy their bonds to lower borrowing costs.
Unlimited Funds
A plaintiff in the case had asked for a delay after the European Central Bank last week pledged unlimited funds to buy euro-area government bonds as it seeks to tame the region’s sovereign-debt crisis. The bid won’t change the ruling date, the court said in an e-mailed statement today.“The market is anticipating the German Constitutional Court will approve the ESM,” said Yoshitsugu Fujita, assistant vice-president of global markets in New York at Sumitomo Mitsui Trust Bank Ltd. “If it actually passes” the euro will be bought, he said.
The U.S. currency declined against all but two of its 16 major peers before Fed policy makers gather. They will keep their key interest rate at 0.25 percent, according to all 54 economists surveyed by Bloomberg before the announcement on Sept. 13.
The dollar will remain weak if the Fed expands its balance sheet, Chris Weston, an institutional dealer at IG Markets in Melbourne, said in an interview on Bloomberg Television. “I would be looking to sell any kind of big rallies in the dollar.”
Dollar Index
The Dollar Index, which IntercontinentalExchange Inc. (ICE) uses to track the greenback against the currencies of six U.S. trading partners, declined 0.3 percent to 80.184 after touching 80.122, the lowest since May 11.The dollar has lost 1.3 percent in the past week, the worst performance among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro strengthened 0.6 percent, the second-biggest advancer after the New Zealand dollar.
The implied volatility of three-month options for Group of Seven currencies touched 7.81 percent, the lowest since October 2007, according to the JPMorgan G7 Volatility Index. A decrease makes investments in currencies with higher benchmark lending rates more attractive as the risk in such trades is that market moves will erase profits.
Kiwi Gains
New Zealand’s so-called kiwi advanced as Fitch affirmed the country’s AA rating, citing its strong governance and business environment.The kiwi rose 0.7 percent to 81.44 U.S. cents and added 0.3 percent to 63.52 yen.
JPMorgan raised its view on Poland’s currency to neutral from underweight after the nation sold $2 billion of bonds yesterday at the lowest spread over U.S. Treasuries since 2005.
The zloty has become more attractive because of the “diminishing concerns surrounding the current-account deficit and bond valuations,” JPMorgan strategists George Christou and Laura Bierer said in an e-mailed report today.
The currency rose 0.4 percent to 3.2141 per dollar and gained 0.2 percent to 4.1074 against the euro.
The euro may strengthen to a four-month high against the dollar, UBS Ltd. said, citing trading patterns.
The shared currency may rise to $1.2935, the 61.8 percent retracement from its decline from the Feb. 24 high to the July 24 low on the Fibonacci chart, Richard Adcock, head of fixed- income technical strategy in London, wrote in an e-mailed note to clients today. That would be the highest since May 11, according to data compiled by Bloomberg.
Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low.
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