llar Advances as China Interest-Rate Increase Sparks Demand for Safety
By Yoshiaki Nohara and Monami Yui - Dec 26, 2010 9:07 PM PT
Dollar Advances as China Interest-Rate Increase Sparks Demand for Safety - Bloomberg
Dollar Advances on Growth Concern After China’s Rate Increas
Sheets of one hundred dollar bills wait to be cut into singles at the Bureau of Engraving and Printing in Washington. Photographer: Andrew Harrer/Bloomberg
Hillier on Investment Strategy, Dec. 22
Play Video
Dec. 22 (Bloomberg) -- Piers Hillier, chief investment officer at Liverpool Victoria Asset Management, talks about the outlook for Japanese equities and his investment strategy. He speaks with Francine Lacqua on Bloomberg Television's "On The Move." (Source: Bloomberg)
The dollar was near a three-week high against the euro after China’s second interest-rate increase since mid-October highlighted concern that efforts to tame inflation will curb global growth.
The yen earlier touched a three-week high against the euro as JPMorgan Chase & Co. and Morgan Stanley said China’s monetary tightening in 2011 may be mainly in the first half as officials tackle the fastest inflation in more than two years. The dollar was also supported before data forecast to show U.S. consumer confidence advanced. Asian currencies halted gains as China’s rate increase damped the outlook for spending in the No. 1 export market for South Korea, Malaysia and Thailand.
“Reaction on China’s move has been somewhat muted, still the dollar is being supported against the euro,” said Kazuyuki Kato, treasury department manager in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-biggest bank. “Investors are not willing to take risk, as the market is thin near year- end.”
The dollar was at $1.3127 per euro as of 2:02 p.m. in Tokyo from $1.3122 last week. It touched $1.3055 on Dec. 23, the highest since Dec. 1. The yen was at 108.81 per euro from 108.77. It earlier reached 108.43 per euro, the strongest since Dec. 1. The dollar fetched 82.89 yen from 82.88 yen.
The People’s Bank of China increased key one-year lending and deposit rates by 25 basis points on Christmas Day in its second move since mid-October. The change took effect yesterday.
China’s benchmark lending rate rose to 5.81 percent, compared with 7.47 percent before cuts from late 2008 to counter the global financial crisis. It will climb to 6.56 percent by the end of next year, according to the median forecast in a Bloomberg News survey of economists this month.
Rate Increase
The deposit rate increased to 2.75 percent, compared with the 5.1 percent annual pace of inflation in November.
China may raise rates as many as three times in the first half of next year, according to Morgan Stanley, while JPMorgan forecasts two increases in that period.
“You don’t expect rallies in the ringgit or Asian currencies for that matter,” said Vishnu Varathan, an economist at Capital Economics in Singapore. “The fact is the PBOC rate hike has been a long time coming. You were either betting on a very late hike this year or the moment the year turns.”
Asian Currencies
The Bloomberg-JPMorgan Asia Dollar Index slipped 0.1 percent to 115.24, having ended last week at its highest closing level since Nov. 18.
The yen has gained 12 percent this year in a measure of the currencies of 10 developed nations, according to Bloomberg Correlation-Weighted Currency Indexes. The euro has dropped 10 percent, while the dollar is down 1.4 percent.
The dollar and yen erased earlier gains against the euro as advances by Asian stocks countered growth concerns following China’s rate increase.
China’s officials “won’t do anything to destroy economic growth,” said Keiji Matsumoto, a currency strategist in Tokyo at Nikko Cordial Securities Inc. “Impact has been very limited on currencies, since it happened when investors don’t want to move a lot near year-end. They will start pricing in further possible actions once they enter next year.”
The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, advanced 0.7 percent.
The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners including the euro, yen and pound, was little changed at 80.438.
Christmas Sales
The yen typically strengthens in times of financial turmoil as Japan’s trade surplus makes the currency attractive because it means the nation doesn’t have to rely on overseas lenders. The dollar benefits as the world’s main reserve currency.
The Conference Board’s U.S. consumer confidence index increased to 56.4 this month from 54.1 in November, according to the median estimate of economists surveyed by Bloomberg News before the data tomorrow.
“Investors are paying attention to the consumer confidence data to get any hint on economic prospects, as it reflects the trend in Christmas sales,” said Daisaku Ueno, president of Gaitame.com Research Institute Ltd. in Tokyo, a unit of Japan’s largest currency margin company. “A positive number will likely push the dollar higher.”
The greenback gained 0.1 percent to $1.0035 versus the Australian dollar. It strengthened 0.2 percent to 74.81 U.S. cents per New Zealand dollar. Markets in Australia and New Zealand are closed for public holidays today and tomorrow.
To contact the reporters on this story: Yoshiaki Nohara in Tokyo at [email protected]; Monami Yui in Tokyo at [email protected].
To contact the editor responsible for this story: Rocky Swift at [email protected].
By Yoshiaki Nohara and Monami Yui - Dec 26, 2010 9:07 PM PT
Dollar Advances as China Interest-Rate Increase Sparks Demand for Safety - Bloomberg
Dollar Advances on Growth Concern After China’s Rate Increas
Sheets of one hundred dollar bills wait to be cut into singles at the Bureau of Engraving and Printing in Washington. Photographer: Andrew Harrer/Bloomberg
Hillier on Investment Strategy, Dec. 22
Play Video
Dec. 22 (Bloomberg) -- Piers Hillier, chief investment officer at Liverpool Victoria Asset Management, talks about the outlook for Japanese equities and his investment strategy. He speaks with Francine Lacqua on Bloomberg Television's "On The Move." (Source: Bloomberg)
The dollar was near a three-week high against the euro after China’s second interest-rate increase since mid-October highlighted concern that efforts to tame inflation will curb global growth.
The yen earlier touched a three-week high against the euro as JPMorgan Chase & Co. and Morgan Stanley said China’s monetary tightening in 2011 may be mainly in the first half as officials tackle the fastest inflation in more than two years. The dollar was also supported before data forecast to show U.S. consumer confidence advanced. Asian currencies halted gains as China’s rate increase damped the outlook for spending in the No. 1 export market for South Korea, Malaysia and Thailand.
“Reaction on China’s move has been somewhat muted, still the dollar is being supported against the euro,” said Kazuyuki Kato, treasury department manager in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-biggest bank. “Investors are not willing to take risk, as the market is thin near year- end.”
The dollar was at $1.3127 per euro as of 2:02 p.m. in Tokyo from $1.3122 last week. It touched $1.3055 on Dec. 23, the highest since Dec. 1. The yen was at 108.81 per euro from 108.77. It earlier reached 108.43 per euro, the strongest since Dec. 1. The dollar fetched 82.89 yen from 82.88 yen.
The People’s Bank of China increased key one-year lending and deposit rates by 25 basis points on Christmas Day in its second move since mid-October. The change took effect yesterday.
China’s benchmark lending rate rose to 5.81 percent, compared with 7.47 percent before cuts from late 2008 to counter the global financial crisis. It will climb to 6.56 percent by the end of next year, according to the median forecast in a Bloomberg News survey of economists this month.
Rate Increase
The deposit rate increased to 2.75 percent, compared with the 5.1 percent annual pace of inflation in November.
China may raise rates as many as three times in the first half of next year, according to Morgan Stanley, while JPMorgan forecasts two increases in that period.
“You don’t expect rallies in the ringgit or Asian currencies for that matter,” said Vishnu Varathan, an economist at Capital Economics in Singapore. “The fact is the PBOC rate hike has been a long time coming. You were either betting on a very late hike this year or the moment the year turns.”
Asian Currencies
The Bloomberg-JPMorgan Asia Dollar Index slipped 0.1 percent to 115.24, having ended last week at its highest closing level since Nov. 18.
The yen has gained 12 percent this year in a measure of the currencies of 10 developed nations, according to Bloomberg Correlation-Weighted Currency Indexes. The euro has dropped 10 percent, while the dollar is down 1.4 percent.
The dollar and yen erased earlier gains against the euro as advances by Asian stocks countered growth concerns following China’s rate increase.
China’s officials “won’t do anything to destroy economic growth,” said Keiji Matsumoto, a currency strategist in Tokyo at Nikko Cordial Securities Inc. “Impact has been very limited on currencies, since it happened when investors don’t want to move a lot near year-end. They will start pricing in further possible actions once they enter next year.”
The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, advanced 0.7 percent.
The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners including the euro, yen and pound, was little changed at 80.438.
Christmas Sales
The yen typically strengthens in times of financial turmoil as Japan’s trade surplus makes the currency attractive because it means the nation doesn’t have to rely on overseas lenders. The dollar benefits as the world’s main reserve currency.
The Conference Board’s U.S. consumer confidence index increased to 56.4 this month from 54.1 in November, according to the median estimate of economists surveyed by Bloomberg News before the data tomorrow.
“Investors are paying attention to the consumer confidence data to get any hint on economic prospects, as it reflects the trend in Christmas sales,” said Daisaku Ueno, president of Gaitame.com Research Institute Ltd. in Tokyo, a unit of Japan’s largest currency margin company. “A positive number will likely push the dollar higher.”
The greenback gained 0.1 percent to $1.0035 versus the Australian dollar. It strengthened 0.2 percent to 74.81 U.S. cents per New Zealand dollar. Markets in Australia and New Zealand are closed for public holidays today and tomorrow.
To contact the reporters on this story: Yoshiaki Nohara in Tokyo at [email protected]; Monami Yui in Tokyo at [email protected].
To contact the editor responsible for this story: Rocky Swift at [email protected].
Comment