Dollar rises to eight-month high versus yen on Fed; Kiwi Weakens
By Bloomberg
The dollar rose to the strongest in almost eight months against the yen on bets quickening U.S. growth will spur the Federal Reserve to increase interest rates sooner than traders anticipate.
The U.S. currency advanced versus all except one of its 16 major counterparts before reports this week that economists said will show factory orders increased and employers boosted hiring. The yen fell toward the weakest level since 2008 versus the greenback after Kyodo News said Prime Minister Shinzo Abe will appoint Yasuhisa Shiozaki to head the ministry in charge of revamping the national pension fund. New Zealand's dollar fell to six-month low after milk prices declined.
"The U.S. dollar has a bit further it can go," said Janu Chan, an economist at St. George Bank Ltd. in Sydney. "The U.S. data looks strong and supportive of Fed rate hikes some time. If this improvement continues, then there's a good chance that the Fed could move earlier than what markets are anticipating."
The dollar gained 0.1 percent to 105.22 yen at 1:23 p.m. in Tokyo after appreciating to 105.31, the highest since Jan. 10. The U.S. currency rose 0.1 percent to $1.3126 per euro after climbing to $1.3110 yesterday, the strongest since September 2013. The yen dropped 0.1 percent to 138.13 per euro.
U.S. factory orders surged 11 percent in July, after rising 1.1 percent the previous month, according to a Bloomberg survey before today's Commerce Department report. A Labor Department report on Sept. 5 will show payrolls rose by more than 200,000 in August for a seventh month, a separate survey showed.
Rate Forecasts
There's a 44 percent chance Fed policy makers will increase the benchmark interest-rate target by June 2015, compared with a 36 percent likelihood on Aug. 18, according to futures data compiled by Bloomberg. U.S. policy makers have kept their key rate near zero since December 2008 to spur growth.
The Bloomberg Dollar Spot Index, which tracks the U.S. currency versus 10 major counterparts, rose 0.1 percent to 1,034.72 after reaching 1,035.06, the highest since Jan. 23.
The yen dropped for a fourth day as Kyodo News reported Abe will name Shiozaki to head the health ministry today. The 127.3 trillion yen ($1.21 trillion) GPIF is the world's largest pool of retirement savings.
"The cabinet reshuffle is reminding investors of GPIF's reallocation to increase holdings in stocks and foreign assets," said Nagayuki Yamagishi, a senior analyst in Tokyo at Money Square Japan Inc., a foreign-exchange broker. "That's helping yen weakness and stock gains."
BOJ Meeting
The BOJ, which buys about 7 trillion yen of government bonds a month to cap borrowing costs, commences a two-day policy meeting today.
The yen has declined 1.4 percent in the past month, the worst performer after the kiwi of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro fell 1.1 percent, while the U.S. dollar strengthened 1.4 percent.
New Zealand's dollar slid versus all except one of its 16 major peers today after Auckland-based Fonterra Cooperative Group Ltd., the world's biggest dairy exporter, said the price of whole milk powder fell to the lowest since July 2012.
"The not so good news overnight was another drop in dairy prices," ANZ Bank New Zealand Ltd. analysts including Con Williams in Wellington wrote today in a note to clients. The New Zealand dollar "was under sustained pressure after the GlobalDairyTrade auction showed further declines with weak details," they wrote.
The kiwi dropped 0.2 percent to 82.97 U.S. cents after declining to 82.88 cents, the weakest level since Feb. 26.