Dollar Sinks as Asian Stocks Rise on Summers backing out; Crude Slips

NEW YORK (Sept 16)  The dollar weakened against all its major peers while Asian stocks, bonds and U.S. index futures climbed as Lawrence Summers withdrew from consideration as the next Federal Reserve chairman. Crude oil fell after the U.S. and Russia agreed on a plan to eliminate Syria’s chemical weapons.

The greenback slumped against all 14 of its 16 main counterparts currently trading, losing 1 percent against the Australian dollar by 9:17 a.m. in Tokyo. Australian 10-year bond yields dropped as much as 15 basis points and Treasury futures rose. Standard & Poor’s 500 Index (SPX) futures gained 1.1 percent and the MSCI Asia Pacific Excluding Japan Index jumped 0.6 percent with Japanese markets closed for a holiday. West Texas Intermediate crude sank a second day, while copper led industrial metals higher and crop futures declined. Dollar Slides as Summers Withdraws While Syria Deal Sinks Crude.

Summers, a former Treasury Secretary, would tighten Fed policy more than Janet Yellen, who was his main rival to replace Chairman Ben S. Bernanke, according to a Bloomberg Global Poll last week. The Fed is expected to trim Treasury purchases by $10 billion a month at its meeting this week, another survey of economists showed. The U.S. is seeking support from its allies for a deal to confiscate Syria’s chemical arsenal.

“It’s quite positive for equities,” George Boubouras, Melbourne-based chief investment officer at Equity Trustees Ltd., where he helps oversee about $28 billion, said by phone. “It puts Yellen back on the cards as the favorite. She’s more aligned to retaining accommodative policy and is seen as not being as brash as Summers might have been.”

Dollar Slumps

The yen gained a fourth trading day versus the U.S. currency, climbing 0.3 percent to 99.08 per dollar, set for the strongest close this month. The euro added 0.5 percent to $1.3358. The Australian dollar jumped to 93.27 U.S. cents, while the New Zealand currency rose 0.8 percent to 81.96 cents, poised to close at the strongest price since May 15.

The dollar also weakened against some emerging-market currencies, sliding 0.4 percent versus South Korea’s won and 0.3 percent against the Thai baht.

U.S. President Barack Obama said in a statement that while he accepted Summers’ withdrawal he will continue to seek his “guidance and counsel in the future.” Treasuries fell before rebounding Sept. 13 after Nikkei reported Summers would be named Fed chairman.

Australian government bonds due in a decade climbed, pushing yields down 10 basis points, or 0.10 percentage point, to 3.99 percent. Futures on 10-year Treasuries rose 0.8 percent, the most since Aug. 2.

Yellen, Kohn

Yellen, the current Fed vice chairman, may be viewed by markets as a shoo-in for the top job at the Fed after Summers pulled out, National Australia Bank Ltd.’s economics team wrote in a note today. Donald Kohn, a former Fed vice chairman, is also on Obama’s candidate list, the president has said.

The S&P/ASX 200 Index (AS51) jumped 0.8 percent in Sydney, after halting a five-day advance to drop 0.4 percent Sept. 13. The Kospi Index rallied 1.1 percent in Seoul, while Japanese markets were closed for Respect-for-the-Aged Day. The MSCI Asia Pacific Index rose 0.5 percent.

Wholesale-price inflation in India, the main gauge of consumer prices, probably quickened 5.70 percent in August, from 5.79 percent in July, according to the median estimate in a Bloomberg survey before data due today.

The Bloomberg China-US Equity Index of the most-traded Chinese stocks in New York climbed 0.4 percent Sept. 13, capping a 2.2 percent advance in the week.

DeMark Call

The Shanghai Composite Index will extend gains on prospects the world’s second-largest economy will continue to recover, according to Tom DeMark, the founder of Market Studies LLC who predicted the gauge’s rally from a four-year low in June. After a possible correction this week, the measure will rise to a level “much higher” than his last threshold of 2,323, DeMark said in an e-mail.

The Shanghai Composite fell 0.9 percent Sept. 13 to 2,236.22.

WTI crude fell 0.8 percent to $107.31 a barrel, while Brent crude futures slumped 0.9 percent to $110.66. Contracts due next month on gasoline sank 1.2 percent.

U.S. Secretary of State John Kerry will meet with French President Francois Hollande and his counterparts from France and the U.K. as he tries to build support for the Syria plan.

Kerry may also meet with ministers from Turkey and Saudi Arabia, both backers of the rebel forces seeking to topple Syrian President Bashar al-Assad. The discussions come as the United Nations prepares to release, as early as today, an inspection team’s report on a chemical weapons attack in Syria that the U.S. says killed more than 1,400 people.

Fed Outlook

The Fed will decide to cut monthly purchases of Treasuries to $35 billion from $45 billion and keep mortgage-bond buying at $40 billion at its Sept. 17-18 meeting, according to a Bloomberg survey of economists.

For a “big market reaction,” the Fed would have to reduce stimulus by more than the consensus or make cuts to mortgage-bond purchases, Mark Lister, the head of private wealth research at Craigs Investment Partners Ltd. in Wellington, said by phone today.

Investors won’t view any reduction in Fed stimulus at this week’s meeting as a big deal should it go ahead, a Bloomberg Global Poll of investors showed. Fifty-seven percent of those surveyed say they don’t expect a sudden change in the markets, while 8 percent see a rally and just under a third are looking for declines, based on the Sept. 10 poll of 900 investors, traders and analysts who are Bloomberg subscribers.