The US dollar rose against most of its major counterparts and posted its first weekly gain versus the euro this month as investors sold shares and bought short-term Treasuries to guard against losses before the end of the year.
The yen gained versus the euro as stock indexes in the US, Germany and Japan dropped, discouraging demand for riskier assets. The greenback completed its fourth straight weekly loss versus the yen on bets the US Federal Reserve, due to release minutes of its Nov. 4 meeting in the week ahead, will keep borrowing costs at virtually zero through the first half of next year.
“The markets have been getting a little tougher,” said Nick Bennenbroek, head of currency strategy at Wells Fargo & Co in New York. “The Fed introduced conditionality in its policy, and it will be interesting to see the rationale and reasons for that in the minutes.”
The US dollar strengthened 0.3 percent to US$1.4862 per euro from US$1.4903 on Nov. 13. The 16-nation currency touched US$1.4802 on Friday, the lowest level since Nov. 4. The yen appreciated 1.2 percent to ¥132.09 per euro, from ¥133.63. The US currency fell 0.9 percent to ¥88.88, after touching ¥88.64 on Thursday, the lowest level since Oct. 9.
The Fed reiterated at its meeting this month that it would keep the target lending rate at zero to 0.25 percent for “an extended period” and specified for the first time that policy will stay unchanged as long as inflation expectations are stable and unemployment fails to decline. The minutes are due on Tuesday.
Yuan forwards posted their biggest weekly drop in 10 months on speculation China will rebuff international calls for the currency to appreciate. The nation is “passive” on the value of the dollar, the central bank’s Governor Zhou Xiaochuan (周小川) said at a forum in Beijing yesterday, signaling policy makers aren’t yet prepared to loosen controls on the yuan.
US President Barack Obama urged China during his visit there this week to allow the yuan to appreciate. Chinese President Hu Jintao (胡錦濤) made no mention of the currency’s link to the greenback in a joint briefing.
The yuan has traded at about 6.83 per US dollar since July last year after a 21 percent gain in the previous three years. The link of the yuan to the weakening dollar has pushed the Chinese currency down 16 percent versus the euro and 8 percent against the yen over the past year, adding to pressure from China’s export competitors to let the yuan appreciate.
The pound snapped three weeks of advances against the US dollar on concern the UK’s worst budget deficit since records began will hinder the nation’s recovery from recession.
The UK currency fell 1 percent to US$1.6518 as of 4:30pm in London on Friday, its biggest weekly drop since September. It fell 0.6 percent to £0.8995 per euro, and dropped 1.7 percent to ¥146.97.
The pound has gained 13 percent against the US dollar this year and 6.3 percent against the euro.
Asian currencies fell this week, led by Indonesia’s rupiah, on speculation regional policy makers will restrict capital inflows to prevent appreciation that may hurt exports.
Slides in global stocks also curbed demand for emerging-market assets.
Indonesia’s rupiah dropped 1.0 percent from a week ago to 9,468 per US dollar. The Philippine peso slumped 0.8 percent to 47.08 and India’s rupee slid 0.7 percent to 46.6599.
The NT dollar declined 0.2 percent on Friday to NT$32.35 versus the greenback, trading little changed for the week.
The Malaysian ringgit dropped 0.2 percent from last Friday to 3.3845 and Thailand’s baht rose 0.1 percent to 33.25.
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