By - Feb 16, 2011 10:50 PM GMT+0800
The dollar strengthened versus the yen after U.S. builders began work on more homes than forecast in January and wholesale prices increased for a seventh month.
The euro erased gains versus the dollar as stocks rose on optimism that the global recovery is gaining momentum. The yen earlier reached a two-week low versus the shared currency. The pound slid after Bank of England Governor Mervyn King said inflation will peak this year and ease in 2012.
“U.S. economic data is starting to gathering steam,” said Boris Schlossberg, director of research at online currency trader GFT Forex in New York. “We will see North American strength today.”
The dollar appreciated 0.2 percent to 83.95 yen at 9:48 a.m. in New York, from 83.77 yesterday. The greenback gained 0.1 percent to $1.3476 versus the euro, after earlier falling as much as 0.6 percent to touch $1.3571. The yen declined 0.1 percent to 113.11 per euro after earlier touching 113.54, the weakest level since Jan. 28.
The yen remained lower versus the dollar and euro even after data showed U.S. industrial production unexpectedly dropped 0.1 percent last month, dragged down by a decline in utilities as milder temperatures curbed demand for heating.
U.S. builders broke ground on 596,000 homes at an annualized rate last month, according to Commerce Department data. The median forecast in a Bloomberg News survey was for 539,000. Producer prices increased for a seventh month in January, rising 0.8 percent, Labor Department data showed. The data matched the median forecast in a Bloomberg News survey.
Yen Declines
The yen weakened against 14 of its 16 major counterparts. Japan’s currency has fallen 3.5 percent this year, based on Bloomberg Correlation-Weighted Indexes. The euro has risen 1 percent and the dollar is little changed.
The pound slid 0.7 percent to $1.6013 and lost 0.6 percent to 84.15 pence per euro. The Bank of England said today its central forecast is for inflation to peak at about 4.4 percent this year before easing to the 2 percent goal by the middle of 2012, and undershoot the target within two years.
“The big mover was sterling, with a less-hawkish-than- expected inflation report and mildly weaker employment data,” said Firas Askari, head currency trader in Toronto at Bank of Montreal.
King told reporters in London today policy makers anticipate that “the chances of inflation being above or below the target are broadly equal.”
Sterling is still up 2.6 percent against the dollar this year as accelerating inflation has spurred speculation policy makers will be forced to raise borrowing costs.
U.K. Unemployment
A U.K. report yesterday showed consumer prices rose an annual 4 percent last month, the fastest since November 2008 and twice the central bank’s 2 percent target. Data today showed British unemployment claims unexpectedly rose in January.
Australia’s dollar pared its gains after Moody’s Investors Service said it may cut credit ratings on the nation’s biggest banks.
The Aussie was 0.1 percent stronger at 99.77 U.S. cents, after gaining earlier as much as 0.5 percent. It fell yesterday to 99.44 cents, the weakest level since Jan. 31. The New Zealand dollar was little changed at 75.12 U.S. cents after climbing 0.6 percent to 75.63 cents.
The currencies trimmed their advances after Moody’s said its concern about lenders’ access to foreign funding may result in downgrades for major banks in both Australia and New Zealand, including Westpac Banking Corp., National Australia Bank Ltd. and ANZ National Bank Ltd.
Citigroup Inc. ended a bet the Australian dollar would gain against the U.S. currency, the bank said in a press release today. The trade was eliminated after the Aussie fell below 99.50 per dollar, a predetermined level set to limit losses.
To contact the reporters on this story: Allison Bennett in New York atabennett23@bloomberg.net; Lucy Meakin in London at lmeakin1@bloomberg.net.
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
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