Dollar Near One-Month High Versus Yen Before U.S. Data

The dollar was 0.2 percent from an almost one-month high against the yen before data today that may add to signs of economic recovery in the U.S., curbing the chances of expanded monetary easing from the Federal Reserve.
The greenback held gains versus most major peers with reports forecast to show improvements in the manufacturing industries of the world’s biggest economy. Demand for the euro was limited after figures yesterday showed gross domestic product contracted in Europe’s 17-nation currency bloc. The Australian dollar touched a one-week low after a report indicated consumer confidence fell by the most in five months.
“The U.S. economy is growing slowly, and I view that as a positive,” said Hans Kunnen, chief economist at St. George Bank Ltd. in Sydney. The expansion is “at a sufficient pace for the Fed to hold fire. This lends support to the dollar.”
The dollar rose 0.1 percent to 78.80 yen at 12:19 p.m. in Tokyo. It touched 78.93 yesterday, the strongest since July 18. The U.S. currency was unchanged at $1.2322 per euro. The euro traded at 97.09 yen from 97.02.
Industrial production in the U.S. probably rose 0.5 percent last month after a 0.4 percent gain in June, according to the median forecast of economists in a Bloomberg News survey before today’s data. The New York Fed’s general economic index is predicted to be at 7 in August, a separate poll indicated. Readings greater than zero signal expansion in the region and the last negative reading was in October.
Commerce Department figures yesterday showed July retail sales expanded by more than economists expected.

Fed Policy

U.S. central bank officials refrained from boosting monetary stimulus at the conclusion of their last meeting on Aug. 1. The Fed bought $2.3 trillion of mortgage and Treasury debt from 2008 to 2011 in two rounds of so-called quantitative easing to cap borrowing costs. Policy makers have held the bank’s key rate in a range of zero to 0.25 percent since 2008 and plan to keep it there at least through late 2014.
The dollar has had the biggest gain in the past year among 10 major currencies tracked by Bloomberg Correlation-Weighted Indexes, rising 8.1 percent. The euro dropped 8.9 percent, making it the second-worst performer. The yen has advanced 3.4 percent.
GDP in the euro bloc fell 0.2 percent in the three months through June from the first quarter, when it stagnated, the European Union’s statistics office in Luxembourg said yesterday. Separate reports showed Germany’s expansion was faster than expected, while France avoided a contraction in the same period.

Technical Resistance

Europe’s shared currency “seems to have hard technical resistance around $1.2450 and it will likely take much better data than modestly better-than-feared GDP results to break it,” Greg Anderson, the North American head of G-10 currency strategy at Citigroup Inc. in New York, wrote in a report yesterday. The level was last seen on July 5, according to data compiled by Bloomberg. Resistance is an area on a chart where orders to sell may be clustered.
The euro has weakened in the past 12 months as concern increased that the region’s fiscal turmoil is deepening, damping demand for the shared currency. Five of the euro bloc’s 17 states have sought international aid to cope with their debt.
Spain’s government is considering a request for a sovereign bailout after earlier accepting aid to shore up the nation’s banks, European Economic and Monetary Affairs Commissioner Olli Rehn signaled yesterday.
“The Spanish government has an open mind on this issue, but no decision has been made,” Rehn said in a Bloomberg Television interview in New York yesterday. “We stand ready to act if there is a request.”
The Australian dollar slid versus its U.S. counterpart after a report today showed a consumer sentiment index published by Westpac Banking Corp. (WBC) and the Melbourne Institute declined 2.5 percent to 96.6 in August. A number below 100 indicates pessimists outnumber optimists. The so-called Aussie fell 0.2 percent to $1.0473 after earlier dropping to $1.0465, the lowest since Aug. 3.
To contact the reporters on this story: Sharon Chen in Singapore at schen462@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net