Dollar Falls to One-Month Low Versus Euro as Krone Slides

Frankfurt (June 30)  The dollar fell to a one-month low versus the euro as a gauge of U.S. business activity fell more than forecast, adding to evidence the recovery in the world’s largest economy is slowing.

The U.S. currency headed for a third monthly decline against the yen after closing last week below the 200-day moving average for only the second time since 2012. Norway’s krone fell to the weakest level in four months versus the euro as retail sales contracted more than economists forecast. Australia’s dollar headed for its longest run of monthly gains in four years before the Reserve Bank sets policy tomorrow.

“The dollar has been heavy for a few weeks now and it’s really a continuation of that trend,” Adam Cole, the head of Group of 10 currency strategy at Royal Bank of Canada in London, said in a phone interview. “It’s being driven by a combination of low yields and low volatility, and the dollar is just being dragged lower in the environment generally.”

The greenback fell 0.3 percent against the euro to $1.3692 at 1:32 p.m. New York time. Japan’s currency dropped 0.2 percent at 138.66 versus the 18-nation euro.

The dollar fell 0.2 percent to 101.27 yen, after touching 101.24, the weakest level since May 21. It has fallen 0.5 percent since May 30, and is headed for a second quarterly drop.

Winners, Losers

New Zealand’s dollar has rallied 3 percent this month, the most of the greenback’s 16 major peers. The British pound has climbed 2.1 percent, while the Norwegian krone has fallen 2.6 percent and the Mexican peso declined 0.9 percent.

This quarter, South Korea’s won has risen 5.2 percent and Canada’s dollar is up 3.6 percent. The Swedish krona has depreciated 3.3 percent.

The real has gained 7.1 percent against the dollar this year, while the krona is down 3.8 percent.

The JPMorgan Global FX Volatility Index was at 5.48 percent, the lowest level on record according to data compiled by Bloomberg going back to 1992.

China’s yuan completed the biggest monthly gain since April 2013 amid optimism the world’s second-largest economy is improving and as the government moves to bolster the currency’s global use. The currency gained 0.68 percent in June in Shanghai, trimming this year’s loss to 2.4 percent, China Foreign Exchange Trade System prices show.

Weaker Dollar

Canada’s dollar briefly fell from the strongest level since January after the nation’s economy grew less than forecast in April. The currency, called the loonie, fell for the first time in four days as the gross domestic product reading supported comments from Bank of Canada that a gain in inflation is transitory rather than a sign the economy is heating up.

The nation’s economy grew 2.1 percent in April from a year earlier, matching a 2.1 percent gain the previous month, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg forecast a 2.3 percent expansion.

The loonie was little changed at C$1.0667 per U.S. dollar, after falling as much as 0.3 percent.

The greenback was poised for declines against 12 of its 16 major peers this month after the Commerce Department said on June 25 U.S. gross domestic product shrank 2.9 percent in the first quarter, the most since 2009.

Yield Levels

“U.S. yields, particularly 10-year yields, have been drifting lower and that’s evidently saying something about the economy,” said Richard Franulovich, chief currency strategist for the northern hemisphere at Westpac Banking Corp. in New York. “The dollar’s taking its cue from that.”

Treasury 10-year notes yield 2.52 percent, almost the lowest level since June. 2.

The Institute for Supply Management-Chicago Inc.’s business barometer fell to 62.6 in June from 65.5 the prior month. The median forecast of 45 economists in a Bloomberg survey projected the index would fall to 63.

Federal Reserve Chair Janet Yellen said this month policy makers remained committed to low interest rates for a “considerable time” after ending a bond-purchase program they have used to spur growth. The central bank has held its benchmark rate target at zero to 0.25 percent since 2008, while trimming monthly bond-buying to $35 billion, on pace to end the program late this year.

Growth Outlook

“Investors have been downgrading their outlook for growth this year in the U.S.,” said Lee Hardman, a foreign-exchange strategist in London at Bank of Tokyo-Mitsubishi UFJ Ltd. “The fact that we closed below the 200-day moving average on Friday is encouraging some speculative investors to consider buying the yen in the near term.”

The Norwegian krone slumped after a report showed retail sales fell 0.9 percent last month, exceeding the 0.3 percent drop predicted by analysts in a Bloomberg News survey. The Nordic currency depreciated 0.4 percent to 8.3970 per euro after touching 8.4195, the weakest level since Feb. 10.

Norway’s currency has fallen 2.3 percent in the past six months, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-nation currencies, making it the worst performer after Sweden’s krona. The euro slid 2 percent and the yen gained 3.1 percent. The U.S. dollar weakened 1.1 percent.

Source:  Bloomberg