Dollar Weakens on G-20 Vow, Fed; Stocks, Commodities Advance
Adam Cole, head of global currency strategy at RBC Capital Markets, talks about the outlook for the dollar and the yen after the Group of 20 finance ministers meetings in South Korea over the weekend. Cole speaks from London with Mark Barton on Bloomberg Television’s “Countdown.” (Source: Bloomberg)
Play VideoOct. 25 (Bloomberg) — Brendan Brown, chief economist at Mitsubishi UFJ Securities International Plc, talks about the Group of 20 meeting in Seoul and the outlook for Asian currencies and the dollar. He speaks with Maryam Nemazee on Bloomberg Television’s “The Pulse.” (Source: Bloomberg)
Play VideoOct. 25 (Bloomberg) — Geoff Kendrick, head of European foreign exchange strategy at Nomura International Plc, talks about the outlook for the yuan and the dollar. He speaks with Maryam Nemazee on Bloomberg Television’s “The Pulse.” (Source: Bloomberg)
The dollar weakened, touching a 15- year low against the yen, on skepticism the Group of 20 pledge to avoid devaluations will stem the U.S. currency’s decline. Stocks, U.S. futures and Treasuries rose, while copper and cotton rallied.
The dollar depreciated against 15 of its 16 most-traded counterparts, slipping 1 percent to 80.59 yen and 0.6 percent to $1.4042 per euro at 11:35 a.m. in London. The yield on the 30- year U.S. Treasury bond fell four basis points to 3.90 percent, while the 10-year U.K. gilt yield sank three basis points to 2.92 percent. The MSCI World Index gained 0.6 percent, while futures on the Standard & Poor’s 500 Index added 0.7 percent. Cotton jumped 3.8 percent and copper advanced 2.4 percent.
G-20 officials vowed to refrain from “competitive devaluation” and to let markets set foreign-exchange values, as speculation increased the Federal Reserve will announce another round of quantitative easing to bolster the U.S. economy. Singapore Exchange Ltd. agreed to buy ASX Ltd., Australia’s main stock-exchange, for A$8.4 billion ($8.3 billion). Deals have climbed 24 percent to $1.65 trillion this year from the same period in 2009 as companies spend stockpiled cash to expand, according to data compiled by Bloomberg.
“The foreign-exchange war is not over,” Roberto Mialich, senior currency strategist at UniCredit SpA in Milan, wrote in a report today. “Prospects of an ultra-loose monetary policy in the U.S. do not bode well for the greenback.”
The Dollar Index, which tracks the U.S. currency against those of six trading partners, dropped 0.8 percent to 76.858, snapping a two-day gain. Sweden’s krona appreciated against all but two of its most-traded peers before the nation’s central bank decides on interest rates tomorrow. The Riksbank will boost its seven-day repo rate to 1 percent from 0.75 percent, according to all 20 economists surveyed by Bloomberg.
The pound weakened against 13 of its 16 most actively traded counterparts, falling as much as 0.9 percent to 126.46 yen, the least since Feb. 2, 2009, and depreciating 0.3 percent to 89.19 per euro.
G-20 officials called for more sustainable current-account deficits without embracing a U.S. proposal for targets. Policy makers ended the meeting in South Korea on Oct. 23, seeking to calm fears over a potential trade war. G-20 members will meet again in Seoul on Nov. 11 and 12.
“Risky assets are performing on the view we’ve taken a small step from the risk of a trade war,” said Adam Cole, global head of currency strategy at Royal Bank of Canada Europe Ltd. in London. “That’s generally leaving the dollar lower.”
Cotton futures jumped as much as 4.2 percent to a record $1.2471 a pound on prospects for crop damage in China and the U.S. and declines in the value of the dollar, boosting demand for commodities as a hedge. Copper climbed $191 to $8,525 a metric ton, palladium advanced 3 percent and crude oil gained 1.5 percent to $82.93 a barrel.
The Stoxx Europe 600 Index rose 0.4 percent as more than two stocks gained for every one that fell. Basic-resource companies led the advance, with BHP Billiton Ltd., the world’s largest mining company, rallying 2.9 percent. Hermes International SCA surged 7.5 percent after LVMH Moet Hennessy Louis Vuitton SA agreed to buy a 17 percent stake.
The MSCI Asia Pacific Index added 1.3 percent as ASX Ltd. soared 19 percent in Sydney. Singapore Exchange declined 4.6 percent. KDDI Corp., Japan’s second-largest mobile-phone operator, surged 7.3 percent after announcing a 100 billion yen ($1.2 billion) stock buyback. Kia Motors Corp. advanced 5.8 percent after Goldman Sachs Group Inc. raised its rating to “buy” from “neutral.”
The gain in U.S. futures indicated the S&P 500 may rise for a fourth day. Sales of U.S. existing homes probably climbed in September for a second month, economists said before a National Association of Realtors report due at 10 a.m. in Washington today. Purchases rose to a 4.3 million annual rate, up 4.1 percent from August, according to the median of 64 forecasts.
More than 85 percent of S&P 500 companies that have posted third-quarter results since Oct. 7 topped the average analyst profit projection, according to data compiled by Bloomberg. Texas Instruments Inc. is among 10 S&P 500 companies scheduled to report earnings today.
The cost of insuring against losses on corporate bonds dropped to the lowest since May in the market for credit-default swaps. The Markit Crossover Index of swaps linked to 50 European mostly high-yield companies fell 13 basis points to 446, according to JPMorgan Chase & Co.
The yield on the 10-year Treasury note declined almost three basis points to 2.53 percent. The U.S. auctions $10 billion of five-year Treasury Inflation Protected Securities today, and will also sell $99 billion of two-, five- and seven- year debt this week.
German bonds rose, sending the yield on the 10-year bund down two basis points to 2.46 percent. Belgium auctions as much as 2.8 billion euros of 2013, 2016 and 2020 securities today.
The MSCI Emerging Markets Index added 1 percent, the most in almost two weeks. The Shanghai Composite Index jumped 2.6 percent to a six-month high as Gree Electric Appliances Inc., China’s largest maker of home air-conditioners, surged 6.9 percent and liquor maker Luzhou Laojiao Co. gained 9.5 percent after reporting higher profit. Benchmark indexes in Russia, Taiwan and Indonesia rallied more than 1 percent.