Dec. 6 (Bloomberg) -- The yen climbed to a five-week high against the euro while the dollar rose against an index of the currencies of six U.S. trading partners as the deepening global recession increased the haven appeal of the currencies.
The ICE's Dollar Index, which tracks the greenback against the euro, the yen, the pound, the Canadian dollar, the Swiss franc and Sweden's krona, climbed 0.7 percent to 87.121. It touched 88.463 on Nov. 21, the highest since April 2006.
'Tug of War'
"You have a tug of war between gloomy U.S. economic fundamentals and the flight to safety to the dollar," said Stephen Malyon, co-head of currency strategy at Scotia Capital Inc. in Toronto. "The dollar still enjoys some support against most other currencies."
Germany manufacturing orders slumped in October more than forecast, dropping 6.1 percent after being adjusted for seasonal swings and inflation, the Economy Ministry reported yesterday in Berlin. It's the 10th decline in orders in the past 11 months.
Futures contracts on the Chicago Board of Trade yesterday showed 76 percent odds the Fed will lower its 1 percent target lending rate to 0.25 percent by its next meeting on Dec. 16, compared with a 32 percent chance a week earlier.
Federal Reserve Chairman Ben S. Bernanke said in a Dec. 1 speech in Austin, Texas, that the central bank may use less conventional policies, such as buying Treasury securities, to revive the economy
because there's "obviously limited" room to lower borrowing costs.
The European Central Bank delivered the biggest interest- rate cut on Dec. 4 in its 10-year history as the economic slump deepened and the inflation rate plunged. ECB policy makers lowered the main refinancing rate by 0.75 percentage point to 2.5 percent.
Details here.
Dec. 4 (Bloomberg) -- Crude oil fell for a fifth day on signs that U.S. fuel demand has continued to decline from last year amid the longest economic contraction
since World War II.
Crude oil for January delivery dropped as much as 25 cents, or 0.5 percent, to $46.54 a barrel. It was at $46.63 at 9:20 a.m. Singapore time on the New York Mercantile Exchange. Futures have tumbled 68 percent since reaching a record $147.27 on July 11. Yesterday, crude fell 17 cents, or 0.4 percent, to $46.79 a barrel, the lowest settlement since Feb. 9, 2005.
Dec. 3 (Bloomberg) -- Gold fell in New York as the dollar strengthened and deflation concerns mounted, reducing the appeal of the metal as an alternative investment. Silver also declined.
The dollar rose against the euro as economists forecast a rate cut tomorrow by the European Central Bank. Gold often moves inversely to the U.S. currency.
Some investors buy the metal to preserve value when consumer prices rise. Excluding food and fuel costs, the U.S. consumer price index fell in October for the first time since 1982, government figures show.
"After having a run to the $830 level a few weeks ago, gold has been under pressure on account of the dollar," Edward Meir, an analyst at MF Global Ltd. in Darien, Connecticut, said today in an e-mailed note. "More importantly, with deflation -- as opposed to inflation – now being the key macro development to watch, gold's attraction has been waning."
Gold futures for February delivery fell $12.80, or 1.6 percent, to $770.50 an ounce on the Comex division of the New York Mercantile Exchange. The metal tumbled 5.2 percent on Dec. 1, the most since March, and is down 8.1 percent this year.
"Gold is at a basic standstill waiting for some real news," Miguel Perez-Santalla, a sales vice president at Heraeus Precious Metals Management in New York, said today in an e- mailed note. "It is all about investors at this stage, as the jewelry industry will not be in the picture again until after the New Year."
Silver futures for March delivery slipped 2.5 cents, or 0.3 percent, to $9.59 an ounce on Comex. The metal has dropped 36 percent this year.
Gold is headed for an annual decline for the first time in eight years, while the U.S. Dollar Index, a gauge that includes six major currencies, is poised for its first advance in three years. The index, which gained 0.4 percent today, rose 9.6 percent in the third quarter, while gold fell 5.1 percent.
Consumer Prices Fall
The CPI declined 1 percent in October, the most since records began in 1947, according to the U.S. Labor Department. Federal Reserve policy makers predicted the U.S. economy will contract until the middle of next year, with some officials concerned about the risks of deflation, according to minutes of their Oct. 28-29 meeting.
Confronting what may be the worst recession since World War II, the Fed will cut its target bank-lending rate at a Dec. 16 meeting by a quarter of a percentage point, to 0.75 percent, according to economists surveyed by Bloomberg News. The Fed has reduced its benchmark interest rate by 4.25 percentage points since September 2007, to 1 percent.
Rate Cuts Expected
Other central banks are lowering borrowing costs. In New Zealand, the Reserve Bank cut its benchmark rate by a record 1.5 percentage points to 5 percent. In the U.K., the Bank of England is expected to slash its key lending rate by a third to 2 percent tomorrow, while the rate for the euro region may be trimmed a half-percentage point to 2.75 percent.
"It looks like the ECB will be cutting rates more than originally expected, and if they do, the dollar will strengthen and we may see weaker metals prices,"
Perez-Santalla said in a report earlier today.
A global recession may curb demand for all raw materials, and prompt some investors to sell precious metals to raise cash and cover losses in other markets, some analysts said.
The Reuters-Jefferies CRB Index of 19 raw materials fell as much as 1.2 percent today to a six-year low. The index has dropped 37 percent this year.
Dec. 4 (Bloomberg) -- The euro fell against the dollar and the yen on speculation the European Central Bank will deliver the biggest interest rates cut in its 10-year history today and signal further reductions to buoy the recession-mired economy.
The euro declined most versus the Brazilian real before the rate decision. The British pound dropped to an all-time low against the euro and the weakest since 2002 versus the euro. The yen gained versus all the major currencies as central banks in the U.K., Sweden, New Zealand and Indonesia cut rates to stem a global economic slowdown, making the Japanese currency more attractive as a haven.
"The bigger picture here is that we need sharply lower rates in the future and that will mean even more cuts down the line," said Paul Robson, a London-based currency strategist at the Royal Bank of Scotland Group Plc. "We'll see the euro-yen and the euro-dollar lower from here."
The euro fell to $1.2637 at 7:14 a.m. in New York from $1.2717 yesterday. It reached $1.2563 on Dec. 2, the lowest level since Nov. 21. The 15-nation currency weakened to 117.37 yen from 118.64 yen. The dollar slid to 92.79 yen from 93.30. The pound slid to 86.49 pence per euro, after trading at a record low of 86.96 pence. It was at $1.4633, and traded as low as $1.4471, the weakest level since May 2002.
"If the ECB cuts less than 100 basis points, it would be a substantial disappointment for the market," said Michael Klawitter , a currency strategist with Dresdner Kleinwort in Frankfurt. "Monetary policy spreads are disappearing and moving in favor of the dollar. Selling the euro against the dollar and the yen are still an appropriate strategy."
'Euro-Zone Recession'
The ECB will lower its benchmark rate to 2.75 percent from 3.25 percent today, according to a Bloomberg News survey of economists. European retail sales declined a larger-than- expected 2.1 percent in October, data showed yesterday, as widening financial turmoil took its toll on consumer confidence.
The euro-region's gross domestic product shrank 0.2 percent in the third quarter from the previous three months, matching an initial estimate, the European Union's Luxembourg-based statistics office said today.
"Recent data suggests the euro-zone recession may last longer than first anticipated and that adds to the case for the ECB to cut interest rates aggressively," said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. "For euro-dollar, this suggests a visit to the recent lows of between $1.23 and $1.24 is likely."
The Bank of England cut its main interest rate to 2 percent from 3 percent today, the lowest level since 1951, to stave off the ravages of the credit crisis. U.K. house prices fell the most since 1992 in November as banks curtailed credit, HBOS Plc said today.
Services, Confidence
An index based on a survey of about 700 U.K. service companies dropped to 40.1 for November, the lowest since the gauge began in 1996, Markit and the Chartered Institute of Purchasing and Supply said yesterday. Consumer confidence fell to the lowest level since at least 2004, Nationwide Building Society said.
The yen rose against the euro on speculation the deepening global slowdown spurred investors to sell higher-yielding assets financed by borrowing in Japan.
Investors have been reducing carry trades, in which they get funds in a country with low borrowing costs and invest in one with higher interest rates.
Japan's benchmark rate of 0.3 percent compares with 4.25 percent in Australia, 5 percent in New Zealand and 3.25 percent in the euro region.
"Investors will likely shun risk amid growing worries over a worldwide recession," said Yuji Saito, Tokyo-based head of the foreign-exchange group at Societe General SA. "The yen may be bought."
New Zealand, Sweden
Japanese businesses cut investment at the fastest pace in six years last quarter, a government report showed today. Capital spending excluding software fell 13.3 percent in the three months ended Sept. 30, a sixth quarterly decline, the Ministry of Finance said in Tokyo. Economists surveyed by Bloomberg expected a 10.9 percent decline.
New Zealand's central bank cut its benchmark rate by a record 1.5 percentage points to 5 percent and signaled more to come as it attempts to steer the economy out of recession.
New Zealand's dollar fell 0.1 percent to 53.18 U.S. cents and 0.5 percent to 49.40 yen from late in New York, following the central bank's rate reduction today.
Sweden's krona fell close to a record low against the euro as the Riksbank cut the benchmark interest rate by the most in 16 years to revive the ailing economy.
Policy makers, who raised interest rates as recently as September, reduced the repo rate today by 1.75 percentage points to 2 percent, compared with the 1 percentage-point reduction forecast in a Bloomberg survey.
"We clearly see the Riksbank providing a guideline to what will come from the other banks today," Klawitter said.
The yuan traded at 6.8837 per dollar, near a five-month low, on speculation U.S. Treasury Secretary Henry Paulson 's calls for a stronger yuan during a Beijing visit this week won't stop China from weakening its currency to support exporters.
