Thursday, February 17, 2011

Dollar Drops, Unemployment Claims Rise, Treasury Yields Fall

The dollar dropped the most in seven trading days against the yen as initial unemployment-benefit claims rose more than estimated last week and yields on U.S. Treasuries fell.

The Swiss franc gained versus all of its 16 most-traded peers and the yen rose against most as Iranian state-run television said the nation will send two warships through the Suez Canal adding to the refuge appeal of the currencies. The greenback fell against most major counterparts as two-year Treasury yields reached the lowest level in more than a week, damping the appeal of dollar-denominated assets.

“The Swiss franc and the Japanese yen are the only real big winners today,” said Paresh Upadhyaya, head of Americas Group-of-10 currency strategy at Bank of America Corp. in New York. “Yields in the U.S. are driving dollar-yen lower, and Treasury yields are reacting to the jobless data that came in higher than expected.”

The dollar weakened 0.5 percent to 83.23 yen at 11:36 a.m. in New York, from 83.68 yen yesterday. It fell earlier as much as 0.6 percent, the biggest intraday drop since Feb. 8. The greenback depreciated 0.3 percent versus the euro to $1.3611. The yen gained 0.3 percent to 113.26 per euro, from 113.55.
Yields on the U.S. two-year note fell as much as six basis points, or 0.06 percentage point, to 0.76 percent, the lowest intraday level since Feb 8. Ten-year note yields fell as much as seven basis points to 3.55 percent, the lowest since Feb. 4.

Jobless Claims

The greenback dropped against the yen after applications for unemployment benefits rose to 410,000 in the week ended Feb. 12, exceeding the 400,000 median forecast in a Bloomberg survey, Labor Department data showed today in Washington.

The U.S. consumer price index increased 0.4 percent for a second month, exceeding the 0.3 percent median estimate of economists surveyed by Bloomberg News, another Labor Department report showed.
Federal Reserve officials differed last month over whether more signs of strength in the U.S. recovery would warrant reducing or slowing record monetary stimulus even as they affirmed disappointment with job growth, according to meeting minutes released yesterday. The Fed has held its key interest rate at zero to 0.25 percent since December 2008 and is buying $600 billion of Treasuries in its latest round of a tactic called quantitative easing.

“You want to see data that suggests shifts in monetary policy views, and CPI was in the right direction but nothing that gets the Fed off its current stance,” said Sacha Tihanyi, a currency strategist at Bank of Nova Scotia in Toronto. “The U.S. dollar has been under pressure for the past 24 hours.”
The Swiss franc climbed 0.9 percent versus the dollar, to 95.09 centimes. It advanced 0.7 percent to 1.2935 per euro.

Iranian Warships
The franc matched yesterday’s 1.2 percent intraday gain against the dollar, the biggest jump since Dec. 28, as Iranian state run Press TV quoted an unidentified naval official as confirming reports the warships plan to transit the canal.

The Suez Canal Authority’s head of traffic, Ahmed El Manakhly, said no Iranian naval vessels have been licensed to pass. He spoke in a telephone interview. The Associated Press reported that the ships withdrew today a request to use the facility. It quoted an unnamed official it said was not authorized to speak to the media.

The Swiss currency gained for a fourth day against the dollar and euro as speculation that unrest will keep spreading through the Middle East damped investor appetite for riskier assets. A security crackdown left at least three people dead in Bahrain, where the army took control of large parts of the city, and police and protesters clashed in Yemen and Libya.

Three-Year High

The Canadian dollar strengthened as much as 0.3 percent to 98.16 cents per U.S. dollar, the strongest level since March 2008, before trading at 98.38 cents.

Wholesale sales increased 0.8 percent in December after a revised 1 percent advance in the previous month, Statistics Canada reported today.

“The bigger moves, particularly after these numbers, are in the higher-yielding, more pro-cyclical currencies,” said Kathy Lein, director of currency research at the online currency trader GFT Forex in New York. “The Canadian dollar benefits from stronger U.S. growth, which will boost U.S. demand for Canadian exports.”

The U.S. is Canada’s biggest trade partner.

Sterling Gains

The pound strengthened as Bank of England policy maker Andrew Sentence said today interest rates should increase. He said BOE policy makers, who have kept the benchmark rate at 0.5 percent since March 2009, can’t be “relaxed” about the level of the currency.

“One of the benefits which we might see from a policy of raising interest rates is a modest appreciation of sterling, which would mitigate the impact of global inflationary pressures in the short term and help to steer inflation back to target over the medium term,” Sentance said in a speech in London.

The pound appreciated 0.5 percent to $1.6169. Against the euro, sterling added 0.3 percent to 84.05 pence.

 Mexico’s peso rose for a second day against the greenback, gaining 0.1 percent to 12.0464 per dollar.




Its still ugly out their.

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