“Australia’s dollar rebounded from its biggest decline in a week on speculation that a wider-than- expected trade deficit reported today won’t be enough to prompt the Reserve Bank to cutinterest rates.

The so-called Aussie rose against most major peers as traders stuck with bets that policy makers will keep the benchmark interest rate unchanged at a meeting next month. New Zealand’s currency, known as the kiwi, slid for a second day versus the greenback after gauges of Asian stocks and raw materials declined.

“The RBA has taken the view that the easing they’ve done so far has yet to work its way into the economy,” said Gareth Berry, a currency strategist at UBS AG in Singapore. “If they do cut at all this year, it’s not going to be immediate. Some bearishness on the Aussie is justified, but overbearishness is not.”

The Australian dollar added 0.2 percent to $1.0248 as of 4:45 p.m. in Sydney from yesterday when it dropped 0.2 percent, the most since Feb. 26. It was little changed at 96.25 yen.

The New Zealand dollar dipped 0.1 percent to 82.80 U.S. cents from 82.84. It weakened 0.2 percent to 77.76 yen.

Interest-rate swaps data compiled by Bloomberg show traders see a 77 percent chance theReserve Bank of Australia will keep the overnight cash rate target at 3 percent when policy makers next meet on April 2. UBS predicts no interest rate cuts for the rest of this year.

Trade Deficit….”

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“The pound fell for the first time in three days against the dollar as Bank of England policy makers begin a two-day meeting to decide whether to add more stimulus to the economy to spur growth.

The U.K. currency weakened against all except one of its 16 major counterparts as 11 of the 39 economists surveyed by Bloomberg predict the central bank will increase its asset- purchase target to at least 400 billion pounds ($603 billion) from the current 375 billion pounds. Sterling strengthened yesterday as a report showed U.K. services expanded in February. U.K. government bonds were little changed.

“The risk, if there is a surprise at all, is that there will be more asset purchases and that will weigh on sterling,” said Raghav Subbarao, a foreign-exchange strategist at Barclays Plc inLondon. “Our base case is that there won’t be any change in policy tomorrow.”

The pound dropped 0.2 percent to $1.5097 at 12:17 p.m. London time after falling to $1.4986 on March 1, the weakest level since July 2010. The U.K. currency declined 0.1 percent to 86.38 pence per euro.

Sterling has slumped 5.5 percent this year, the second worst performer after the yen among the 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar gained 2.6 percent and the euro rose 1.2 percent….”

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The Euro move around on every headline overnight currently trading at 1.3036 up 0.1%

Full look

“Even after the biggest drop of any major currency in the first two months of the year, the pound is still overvalued as both Pacific Investment Management Co. and hedge fund FX Concepts LLC bet it will fall further.

Sterling tumbled 6.7 percent versus the dollar through February, touching the weakest level in almost three years, yet remains 2.3 percent overvalued, based on an Organization for Economic Cooperation and Development measure of purchasing power parity. Options traders have raised bets to the most in almost two years that it will depreciate against the euro, and strategists are cutting their forecasts at the fastest pace after the yen.

The slide reflects growing speculation the Bank of England will boost stimulus while also debasing the currency as the U.K. risks an unprecedented triple-dip recession. Current GovernorMervyn King, who gives way to Bank of Canada Governor Mark Carney in July, has said a weaker pound would help rebalance the economy.

“You ain’t seen nothing yet,” said Neil Williams, chief economist in London at Hermes Fund Managers Ltd., which oversees about $42 billion. “If the world believes there will be significantly more stimulus coming, which I expect, the pound is likely to be under further pressure.”

Sterling Tumbles

The U.K. currency slid to $1.4986 on March 1, the lowest level since July 2010, and down from this year’s high of $1.6381 on Jan. 2. It rose 0.3 percent to $1.5166 at 10:31 a.m. London time today. That’s still a 6.7 percent drop from the start of the year, the third-worst performance among 32 major currencies tracked by Bloomberg after the yen and the rand…..”

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“The currency wars declared by Brazilian Finance Minister Guido Mantega are proving more a battle to salvage economic growth than a spiral of competitive devaluations.

While the yen and pound slide on the prospect central banks will intensify stimulus and South Korea’s won and Chile’s peso strengthen, volatility in the currency market is below its average of the past decade and global stocks have gained $2.15 trillion since the start of 2013. Policy makers reduced intervention over the past 12 months as foreign reserves grew at the slowest pace in four years, data compiled by Bloomberg show.

Even Mantega, who used war terminology in 2010 to criticize industrialized nations for policies that weakened their exchange rates, says he is abandoning efforts to push down the real. Federal Reserve Chairman Ben S. Bernanke and other policy makers signaled last week that currencies are a corollary, not a cornerstone, of policies to boost growth from unacceptably low levels, paving the way for what Morgan Stanley calls a third round of “Great Monetary Easing.”

“Central banks are going to throw the kitchen sink at reviving growth and spurring inflation because the alternative to that is deflation,” Neil Williams, head of economic research at London-based Hermes Fund Managers, which oversees about $42 billion, said in a phone interview on Feb. 27. “The countries that have overall loosened their policies most have had the weakest currencies. It’s not a blatant attempt to out-grow others, it’s just a case of all countries trying to do the same thing at the same time.”

More Stimulus….”

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“The euro approached the lowest level in almost three months against the dollar as Italy moved toward a new election and before data this week economists said will show the region’s economy shrank in the fourth quarter of 2012.

Japan’s yen rose against all but one of its 16 major peers as China’s CSI 300 Index of equities dropped by the most in two years, boosting demand for haven assets. Australia’s dollar sank to an almost eight-month low against its U.S. equivalent after building approvals declined. European Central Bank policy makers, led by President Mario Draghi, will meet on March 7, while central banks from the U.K., Japan and Australia also announce policy decisions this week.

“There’s a whole rash of reasons to be mindful,” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “People are rationalizing where they want to be positioned throughout the mass of event risk this week and probably the way to play it is with a long- dollar bias. The ECB’s language will be monitored very closely.”

The euro fell 0.2 percent to $1.2993 at 6:25 a.m. New Yorktime, after touching $1.2967 on March 1, the lowest level since Dec. 11. The yen gained 0.3 percent to 121.50 per euro and was little changed at 93.50 per dollar.

Italian Votes

The euro weakened last week after Italy’s electorate revolted against outgoing Prime MinisterMario Monti’s austerity measures, handing the party of comedian-turned-politician Beppe Grillo more than 25 percent of the vote with its anti-spending cut message and a call for a referendum on euro membership….”

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“Australia’s dollar fell to an almost eight-month low after a report showed building approvals unexpectedly declined, adding to speculation the Reserve Bank will cut interest rates this year.

The New Zealand dollar and the so-called Aussie slid against most of their 16 major peers after China’s Purchasing Managers’ Index for services industries indicated the slowest expansion in five months. China is the largest trading partner for both Australia and New Zealand.

“Today’s data continues to paint a picture of a fairly weak domestic economy,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. (WBC) in Singapore. “Some of the softness in the Asian data is also not helping Australia. Price action for the Aussie is pretty negative at the moment.”

The Australian dollar dropped 0.8 percent to $1.0125 as of 4:49 p.m. in Sydney, after touching $1.0117, the lowest since July 12. It fell 0.9 percent to 94.61 against the yen.

The New Zealand dollar declined 0.6 percent to 82.03 U.S. cents, after falling to 81.96 cents, the lowest since Dec. 31. The so-called kiwi slid 0.8 percent to 76.64 yen.

Australian home-building approvals declined in January for a second-straight month. The number of permits granted to build or renovate houses and apartments fell 2.4 percent from December, when they fell a revised 1.7 percent, the Bureau of Statistics said in Sydney today. The median economist forecast was for a 2.8 percent gain in a Bloomberg News survey.

Rate Expectations…”

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“Beppe Grillo, the leader of Italy’s nascent Five-Star Movement catapulted into power by last week’s Italian elections, is causing a bit of a stir this weekend.

Yesterday, Grillo told German weekly news magazine Focus that given the dire straits Italy’s economy is in, if things didn’t change, Italians would want to leave the euro.

Today, in an interview with Bild – Germany’s biggest newspaper – Grillo said he supports a referendum on euro membership….”

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“Just in case Lagarde (and everyone else except for the Germans, who have a very unpleasant habit of telling the truth), was lying about that whole “no currency war” thing, China is already one step ahead and is fully prepared to roll out its own FX army. According to China Times, “China is fully prepared for a looming currency war should it, though “avoidable,” really happen, said China’s central bank deputy governor Yi Gang late Friday.” We look forward to the female head of the IMF explaining how China is obviously confused and that it is not currency war when one crushes their currency to promote “economic goals.” Of course, that same organization may want to read “Zero Sum for Absolute Idiots” because in this globalized economy any attempt to promote demand (by an end consumer who has no incremental income and stagnant cash flow) through currency debasement has no impact when everyone does it. But then again, this is the IMF – the same organization that declared Europe fixed in 2009, 2010, 2011, 2012, 2013 and so on….”

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“The pound fell to the lowest level since July 2010 against the dollar after an industry report showed U.K. manufacturing unexpectedly shrank in February.

Sterling dropped for the third time in four days versus the euro as the Bank of England said mortgage approvals declined in January, signaling the housing market is struggling to recover. The pound has dropped the most of any major currency this year as speculation the central bank will need to add more monetary support to the faltering economy damped demand for the currency. U.K. government bonds rose, with 10-year yields set for their biggest weekly drop since June.

“The data was supposed to be good and it came out negative so that has taken the rug out from under sterling’s feet,” said Jane Foley, a senior foreign-exchange strategist at Rabobank International in London. “There is an array of negative fundamentals for the U.K., so it’s very difficult to see silver linings. I think sterling will be weak all year.”

The pound dropped 0.8 percent to $1.5035 at 12:19 p.m.London time after sliding to $1.5013. The U.K. currency declined 0.4 percent to 86.48 pence per euro. It fell to 88.15 pence on Feb. 25, the weakest since Oct. 28, 2011.

The pound has depreciated 5.5 percent this year, the worst performer of 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar gained 3.1 percent and the euro rose 1.4 percent….”

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“The euro fell below $1.30 for the first time in two months after reports showed manufacturing contracted in February and unemployment climbed to a record.

The common currency extended a fourth weekly loss against the greenback as the data added to signs the region remains stuck in a recession and backed the case for the European Central Bank to cut interest rates. The Dollar Index rose to the highest level since August as investors sought safer assets. The pound tumbled after a British factory index unexpectedly shrank in February.

“The overall picture is consistent with a euro-zone economy that is still stuck in recession,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “There are downside risks for the euro. The ECB could signal it is closer to further monetary easing next week.”

The euro fell 0.5 percent to $1.299 at 7:28 a.m. New York time, extending this week’s decline to 1.5 percent. The single currency gained 0.2 percent to 120.51 yen, having depreciated 2 percent this week. The dollar strengthened 0.2 percent to 92.77 yen.

The 17-nation euro slid against all but one of its 16 major peers in February, losing 3.8 percent against the greenback and 3 percent against the yen. The dollar rose 0.9 percent versus the yen, a fifth monthly gain, the longest winning streak since August 2008.

Manufacturing Shrinks…”

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“Australia’s dollar rose versus most of its 16 major counterparts on prospects Reserve Bankofficials meeting next week will refrain from cutting borrowing costs.

The so-called Aussie climbed for a third day against the yen and reversed an earlier decline versus the dollar, following reports that signaled a slowdown in Chinese manufacturing expansion. New Zealand’s currency, known as the kiwi, strengthened versus the dollar and yen as a pullback in Asian stock losses outweighed data today that showed an unexpected drop in the country’s terms of trade.

“The RBA is in wait-and-see mode,” said Andrew Salter, a currency strategist at Australia & New Zealand Banking Group Ltd. (ANZ) In Sydney. “We’re coming to the bottom of the range in the Aussie. We see value at current levels.” ANZ predicts the Australian currency will trade at $1.05 by Dec. 31.

The Aussie added 0.2 percent to $1.0235 as of 4:48 p.m. in Sydney, set for a weekly drop of 0.8 percent. It gained 0.2 percent to 94.76 yen.

New Zealand’s currency rose 0.3 percent to 82.74 U.S. cents. It’s poised to fall 1.3 percent this week, the biggest decline since Dec. 21. It climbed 0.3 percent to 76.60 yen….”

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“The euro fell versus the dollar, extending its first monthly drop since July, as the Netherlandssaid it will breach European Union deficit limits, signaling nations are struggling to grow fast enough to cut their debts.

The 17-nation shared currency also slid against the yen after the Dutch government’s planning agency said today in a statement that the deficit will be 3.3 percent of gross domestic product in 2013 and 3.4 percent in 2014. The New Zealand dollar rose after an index showed business confidence increased. The Dollar Index was little changed before a report that analysts said will show the U.S. economy grew in the fourth quarter.

“The Dutch budget-deficit target forecasts look to be above the 3 percent EU target for this year and next and there are downgrade risks for the Netherlands around that,” saidMelinda Burgess, a currency strategist at Royal Bank of Scotland Group Plc in London. “This adds further weight to our view that we should see further downside for the euro from here. Fiscal and growth worries in the region could really come to the fore.”

The euro weakened 0.2 percent to $1.3114 at 6:57 a.m. New York time and is down 3.4 percent this month. It slid 0.3 percent to 120.84 yen, set for a 3 percent drop in February. The dollar was little changed at 92.15 yen.

Dutch GDP will shrink 0.5 percent in 2013, while growth may pick up later this year, resulting in an expansion of 1 percent in 2014, the Hague-based planning agency CPB said today in a statement. Unemployment is forecast to increase to 6.25 percent in 2013 from 5.3 percent in 2012.

‘Gloomy Numbers’…”

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“The pound advanced against the euro, paring a seventh monthly decline, as the Netherlands said it will breach European Union deficit limits, boosting demand for the U.K. currency as an alternative to euro-area assets.

Sterling strengthened for the first time in three days versus the dollar as the Dutch announcement signaled euro-area nations are struggling to grow fast enough to cut their debts. The pound is the worst-performing major currency this year amid speculation the Bank of England will add more monetary support to the economy. Demand was also limited after gross domestic product shrank last quarter and Moody’s Investors Service cut the nation’s Aaa rating last week.

“Sterling is going to pick up again as a safe haven as we see more worries about the euro region,” said Eimear Daly, a currency-market analyst at Monex Europe Ltd. in London. “People may also be thinking the U.K. situation isn’t as bad as they expected. I do see some more sterling strength coming back into the picture.”

The pound strengthened 0.4 percent to 86.36 pence per euro at 1:04 p.m. London time, trimming this month’s decline to 0.9 percent. Sterling fell to 88.15 pence on Feb. 25, the weakest level since October 2011. The U.K. currency rose 0.3 percent to $1.5207. It has still depreciated 4.1 percent in February.

Daly forecasts sterling will strengthen to $1.53 and 84 pence per euro by the end of March. The median estimates in Bloomberg surveys are for the currency to trade at $1.56 and 85 pence per euro.

Gilt Yields…”

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“The Reserve Bank of Australia said the country’s currency is held by as many as 34 central banks from Reykjavik to Santiago, and models suggested the Aussie dollar was as much as 15 percent overvalued, documents showed.

The central banks of Slovakia and Slovenia were recent additions in a list of 16 economies that publicly hold the Australian currency, according to papers prepared in the second half of 2012 and released today under a Freedom of Information Act request by Bloomberg News. Newcomers on a list of 18 possible holders included China, France, India, South Korea, Thailand and South Africa…..”

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“Australia’s dollar rallied, erasing earlier losses, as traders pared bets the central bank will cut its key interest rate after data showed companies will continue to invest into next year.

The so-called Aussie dropped earlier after figures showed capital spending unexpectedly fell last quarter. New Zealand’s dollar strengthened after global stocks rallied and local data showed business confidence improved and building approvals decreased less than economists estimated. The yield on Australia’s 10-year debt rose from a five-week low.

“The information in the capital expenditure report is not enough to trigger a rate cut next week,” said Annette Beacher, Singapore-based head of Asia-Pacific research at TD Securities Inc. “The first piece of information was a weaker-than expected December quarter. The second piece of information we noticed was that 2013-2014 was stronger than expected. The Aussie seemed to have settled back at a slightly higher level after a violent movement.”

The Australian dollar added 0.4 percent to $1.0278 as of 4:26 p.m. in Sydney, after earlier falling as much as 0.4 percent. It touched $1.0184 yesterday, the lowest since Oct. 10. The Aussie jumped 0.6 percent to 94.93 yen. New Zealand’s dollar advanced 0.5 percent to 83.18 U.S. cents. The so-called kiwi rose 0.7 percent to 76.84 yen.

For the month, Australia’s currency was set for a 1.4 percent drop versus the U.S. dollar. New Zealand’s dollar was poised for a 0.8 percent decline….”

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“The euro strengthened from a seven- week low and Italian 10-year bonds gained after the country sold 6.5 billion euros ($8.5 billion) of debt amid political turmoil. Oil advanced.

The euro appreciated 0.4 percent to $1.3118 at 12:15 p.m. in London after earlier rising as high as 1.3122. Italy’s 10- year bond yield dropped six basis points to 4.84 percent after jumping 41 basis points yesterday. The Stoxx Europe 600 Index (SXXP) climbed 0.2 percent and Standard & Poor’s 500 Index futures advanced 0.13 percent. The Nikkei 225 Stock Average (NKY) capped its biggest two-day decline since November 2011. The yen strengthened against all but one of its 13 major peers and West Texas Intermediate oil gained 0.3 percent….”

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“The euro strengthened from a seven- week low against the dollar as Italian and Spanish bonds trimmed losses on easing concern that inconclusive elections in Italy will deepen Europe’s debt crisis.

The euro advanced versus 12 of its 16 major counterparts as investors bet the European Central Bank will step in to limit any losses in so-called peripheral bonds following GovernorMario Draghi’s pledge in July to safeguard the currency union. The yen weakened on speculation Japan’s Prime Minister Shinzo Abe will select Haruhiko Kuroda, who favors additional stimulus, as the next central bank governor. South Africa’s rand rose as economic growth quickened.

“The political uncertainty in Italy may be euro negative, but it’s not as bad as what happened inGreece,” said Geoffrey Yu, a senior currency strategist at UBS AG in London. “Draghi’s ‘whatever it takes’ pledge is a strong deterrent to a selloff. The market is not ready to challenge him yet. And those who missed the euro rally, especially versus the yen, are trying to get back in.”

The euro gained 0.2 percent to $1.3089 at 7:20 a.m. New York time after dropping to $1.3018, the weakest level since Jan. 7. The single currency advanced 0.4 percent to 120.37 yen. Japan’s currency fell 0.2 percent to 91.97 per dollar.

The 17-nation currency halted losses from yesterday amid speculation Democratic Party leader Pier Luigi Bersani and resurgent ex-Premier Silvio Berlusconi will seek to avoid a ballot that would favor populist Beppe Grillo, whose movement was the top vote-getter in its first national contest. No formal steps can be taken until a new parliament convenes March 15…”

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“Australia’s dollar gained against most of its major peers, erasing earlier losses, as advances in metal prices supported demand for the currency of the resource- rich nation.

The so-called Aussie strengthened versus the greenback and the yen amid speculation central banks in other major economies will continue to loosen monetary policy more than the Reserve Bank of Australia. Japan’s Prime Minister Shinzo Abe is likely to nominate Haruhiko Kuroda asBank of Japan (8301) governor, according to two officials with knowledge of the matter. Local bonds rose, sending 10-year yields to a one-month low on concern Italy’s inconclusive election will result in renewed turmoil in Europe.

“Longer term, we expect the underlying fundamentals for the Aussie dollar to be stronger,” said Janu Chan, a Sydney based economist at St. George Bank Ltd. “While we are expecting the RBA to cut once more, interest rates are going to be relatively high. We still have strong demand for Australian government bonds.”

The Australian dollar rose 0.1 percent to $1.0271 at 4:36 p.m. in Sydney from yesterday, when it declined 0.6 percent. It dropped to $1.0222 on Feb. 21, the lowest since Oct. 15. The Aussie gained 0.3 percent to 94.43 yen, rallying from yesterday’s 2.3 percent drop.

New Zealand’s dollar fetched 83.41 U.S. cents, after falling 0.6 percent to 83.35 yesterday. The so-called kiwi climbed 0.3 percent to 76.70 yen, after losing 2.4 percent by the close in New York.

The yield on Australia’s 10-year bonds fell 12 basis points, or 0.12 percentage point, to 3.38 percent, the lowest since Jan. 25…”

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“The pound fell to its weakest level in almost 16 months against the euro after Moody’s Investors Service cut the U.K.’s AAA credit rating, citing weakness in the nation’s growth outlook.

U.K. government bonds pared an earlier decline. Moody’s lowered Britain’s rating by one level to Aa1 from Aaa on Feb. 22. Sterling, which has tumbled 6.8 percent against the dollar this year, dropped to the lowest since July 2010 before a government report this week that analysts said will show Britain’s economy shrank last quarter.

“Although the timing of the downgrade was a surprise, overall the market has been anticipating a ratings change,” said Ian Stannard, head of European foreign-exchange strategy at Morgan Stanley in London. “In recent weeks we have seen sterling’s safe-haven status erode. After the initial knee-jerk reaction there is the potential for a rebound.”

The pound slid 0.7 percent to 87.59 pence per euro as of 11:27 a.m. London time after depreciating to 87.75 pence, the weakest since Oct. 31, 2011. The pound was little changed at $1.5149 after declining to $1.5073, the lowest since July 2010.

Sterling has slumped 6 percent this year, the second-worst performer among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. Only the yen has fallen more, losing 6.7 percent. The dollar strengthened 1.7 percent.

Switch Emphasis

Three-month implied volatility on the pound versus the euro climbed as high as 9.4 percent, the most since May. 18. Volatility on the pound versus the dollar climbed to 9.23 percent, the highest since June. 19….”

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