“The euro strengthened to a four-week high versus the dollar amid speculation European Central Bank President Mario Draghi will today reassure investors the region’s economy will recover later this year.

Europe’s shared currency rose against most of its 16 major counterparts after the ECB refrained from cutting its main refinancing rate at its monthly policy meeting. The pound advanced for a second day against the dollar as the Bank of England left its asset-purchase target and benchmark rate unchanged. The Australian dollar slid to the weakest level since 2011 as the nation’s shrinking interest-rate advantage over its peers reduced the currency’s allure.

“Given that some indicators have improved and financial conditions are better Draghi might have a more moderate tone,” said Chris Walker, a currency strategist at Barclays Plc in London. “The euro is at the top of its recent range. At the same time, the medium-term growth outlook isn’t that good.”

The euro rose 0.2 percent to $1.3121 at 12:47 p.m. London time after advancing to $1.3131, the highest level since May 9. The single currency advanced 0.2 percent to 129.97 yen. The yen was little changed at 99.07 per dollar after appreciating to 98.84, the strongest since May 9.

JPMorgan Chase & Co.’s Group-of-Seven Volatility Index, based on currency option premiums, fell to 10.08 percent after rising to 10.24 percent on May 31 and June 3, the highest level since Feb. 26.

Benchmark Rate….”

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“The Australian dollar fell to the lowest level since 2011 as the nation’s shrinking interest-rate advantage over its peers damps the allure of the currency.

Insight Investment Management Ltd., which oversees about $134 billion in fixed income and currencies, has been selling the Aussie as the yield spread between Australia’s sovereign debt and its global peers narrowed by almost half a percentage point since March. The Australian and New Zealand dollars slid against the yen for a third day as Asian stocks extended a global rout, sapping demand for riskier assets.

“The Aussie’s trend is clearly downward,” said Kengo Suzuki, the chief currency strategist at Mizuho Securities Co. in Tokyo, a unit of Japan’s third-biggest financial group by market value. “The Australian dollar remains susceptible to selling when markets are in a risk-off situation.”

Australia’s currency dropped 0.6 percent to 94.81 U.S. cents as of 5:11 p.m. in Sydney after touching 94.35, the weakest since Oct. 4, 2011. New Zealand’s kiwi dollar fell 0.2 percent to 79.53 U.S. cents after reaching 79.03, the lowest since July 26. The Aussie slid to 93.45 yen, a level unseen since Feb. 27, before trading at 94.18, 0.4 percent lower than yesterday. New Zealand’s currency was little changed at 78.99 yen….”

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“The yen strengthened versus the dollar and euro as Japanese stocks slumped after Prime Minister Shinzo Abe failed to provide additional detail on stimulus measures, boosting demand for safer assets.

The euro declined against the dollar after a report showed the region’s economy shrank in the three months through March, in line with an earlier estimate. A volatility measure of Group-of-Seven currencies approached the highest since February. Australia’s dollar fell after the nation’s gross domestic product grew at the slowest pace in almost two years. The pound advanced as a report showed services output in the U.K. expanded in May by the most in more than a year.

“There’s general disappointment that Abe didn’t announce anything that was surprising or new,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “There’s some disappointment in Japanese stocks and that’s pushing the yen up. The Aussie is likely to remain pressured after the GDP (AUNAGDPC) data.”

The yen advanced 0.5 percent to 99.58 per dollar as of 7:01 a.m. in New York after reaching 98.87 on June 3, the strongest since May 9. Japan’s currency appreciated 0.6 percent to 130.08 per euro. Europe’s shared currency dropped 0.1 percent to $1.3063.

Japan’s currency gained against all but one of its 16 major counterparts after the Topix index of shares closed down 3.2 percent….”

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“The yen weakened as Asian and European stocks gained amid waning speculation that theFederal Reserve will reduce monetary stimulus.

Japan’s currency depreciated beyond 100 per dollar after climbing to the strongest in three weeks yesterday. Australia’s dollar declined versus all of its 16 major counterparts after theReserve Bank said the inflation outlook provided some scope for further monetary easing. South Africa’s rand strengthened for a second day against the U.S. currency amid demand for higher-yielding assets.

“The market is giving back some of its recent moves, with the yen weakening,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “The performance of the U.S. economy and Fed policy direction will be important for the yen.”

The yen fell 0.4 percent to 99.90 per dollar at 7:09 a.m. New York time after depreciating to 100.42. It appreciated to 98.87 yesterday, the strongest since May 9. Japan’s currency declined 0.5 percent to 130.85 per euro after gaining 1 percent during the previous two days. The euro was little changed at $1.3091.

Japan’s currency will weaken toward 110 per dollar over the next 12 months, Bank of Tokyo-Mitsubishi’s Hardman said.

The MSCI Asia Pacific Index of shares gained 1.1 percent and the Stoxx Europe 600 Index advanced 0.3 percent.

Fed Stimulus…”

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“The euro held a gain from last week versus the dollar after a report showed manufacturing in the 17-nation currency bloc contracted at a slower pace than initially estimated in May.

Europe’s shared currency pared an intraday advance after Federal Reserve Bank of San Francisco President John Williams said the central bank’s asset-purchase program has the potential to end this year. Norway’s krone, Sweden’s krona and South Africa’s rand rallied on data showing manufacturing in the three nations expanded last month. Turkey’s lira slid following a weekend of violent protests.

“The surprise in the euro-region data is lending support to the euro,” said Kasper Kirkegaard, a senior currency strategist at Danske Bank A/S (DANSKE) in Copenhagen. “At the moment it only takes little news to send the euro higher against the dollar because the market is very long dollars.” A long position is a bet that an asset will rise in price.

The euro was little changed at $1.30 at 7:34 a.m. New York time. It reached $1.3061 on May 30, the strongest level since May 9. Europe’s shared currency gained 0.4 percent to 1.2464 Swiss francs and was little changed at 130.53 yen. Japan’s currency traded at 100.50 per dollar.

The euro will trade at about $1.30 for the next three months, before dropping to $1.27 by the end of the year, Kirkegaard predicted.

Manufacturing Gauge…”

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“Australia’s dollar and government bond yields climbed amid signs that a slowdown in China is bottoming out, easing concern demand for commodities will decrease in Asia’s biggest economy.

The Aussie gained against all of its 16 major peers after official Chinese data over the weekend showed manufacturing accelerated and as a technical indicator signaled a recent decline in the currency was overdone. Local 10-year bond yields rose before a Reserve Bank of Australia policy meeting tomorrow, when the central bank will probably keep the benchmark rate at a record-low 2.75 percent, economists forecast.

The manufacturing report published June 1 was “the first seemingly positive bit of economic news that we’d had from China for some time,” said Ray Attrill, the global co-head of currency strategy at National Australia Bank Ltd. in Sydney. “There’s a chance that we can push a little bit higher,” he said, referring to the Aussie.

Australia’s dollar added 0.8 percent to 96.49 U.S. cents as of 4:36 p.m. in Sydney after posting a 7.7 percent tumble in May, the biggest monthly slump since September 2011. New Zealand’s dollar rose 0.4 percent to 79.75 U.S. cents following a 7.2 percent decline last month.

The 14-day relative-strength index for the Aussie against the U.S. dollar slid to as low as 19.5 last month, a level unseen since May 2010, and was at 25.5 on May 31. Readings below 30 indicate an asset’s price has fallen too rapidly and is set for a rebound.

Chinese Economy

The Purchasing Managers’ Index of Chinese manufacturing advanced to 50.8 in May from 50.6 the prior month, the National Bureau of Statistics and China Federation of Logistics and Purchasing said on June 1. Economists in a Bloomberg News survey had forecast 50, which marks the dividing line between expansion and contraction….”

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“Australia’s dollar fell to the lowest since October 2011 versus its U.S. peer after the 10-year yield spread between the two countries’ debt narrowed to the least in more than four years on signs the American economy is improving.

Local bonds fell, with the 10-year rate climbing to a 2-month high, after U.S. Treasury benchmark yields rose to the most since April 2012. The Aussie weakened to a more-than four-year low against its New Zealand counterpart. Pacific Investment Management Co., which runs the world’s biggest bond fund, said it expects further interest rate cuts by the Reserve Bank of Australia as mining investment cools.

“The diminishing yield differential is one argument for the Aussie’s move lower,” said Michael Turner, a debt strategist at Royal Bank of Canada in Sydney. “There certainly seems to be some downside risk to growth in Australia. The risk is skewed for more easing by the RBA.”

The Australian dollar touched 95.36 U.S. cents, the weakest since October 2011, before trading at 95.38 at 3:53 p.m. in Sydney, 0.8 percent below yesterday’s close. It fell 0.6 percent to NZ$1.1840 after earlier dropping to NZ$1.1837, the lowest since January 2009. The Aussie weakened 0.8 percent to 97.78 yen. New Zealand’s dollar slid 0.2 percent to 80.57 U.S. cents and lost 0.3 percent to 82.45 yen.

Australia’s 10-year bond yield rose 15 basis points or 0.15 percentage point to 3.47 percent, after touching 3.5 percent, the highest since March 27. The U.S. Treasury 10-year yield rose to 2.23 percent today, a level unseen since April 2012. The spread between the two narrowed to 116 basis points yesterday, the least since November 2008.

U.S Economy….”

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“The Dollar Index rose for a second day before U.S. data tomorrow on first-quarter growth amid speculation the Federal Reserve will curb monetary stimulus.

The Australian dollar fell to the weakest level since October 2011 after the International Monetary Fund cut its growth forecast for China. A gauge of Asian currencies touched an almost eight-month low on concern investors will repatriate funds from emerging markets back to the U.S.

“The dollar is strong,” said Marito Ueda, the senior managing director at FX Prime Corp. (8711), a currency-margin company in Tokyo. “The U.S. economy is steadily recovering, and a reduction in monetary easing appears to be coming into view.”

The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against currencies of six major U.S. trading partners, added 0.3 percent to 84.349 at 6:50 a.m. inLondon. It reached 84.498 on May 23, the most since July 2010.

The dollar was little changed at $1.2845 per euro after rising 0.6 percent yesterday. The yen traded at 131.57 per euro from 131.59 and was little changed at 102.42 per dollar. The Aussie fell 0.8 percent to 95.40 U.S. cents, after dropping to 95.36, the weakest since Oct. 5, 2011.

The U.S. Commerce Department is likely to say tomorrow the world’s biggest economy grew at an annualized 2.5 percent pace in the first quarter, according to the median forecast of economists surveyed by Bloomberg News. It would be unchanged from the preliminary reading released last month.

U.S. Growth

U.S. real gross domestic product will probably expand 2 percent this year, compared with a 0.5 percent contraction in the euro region, a separate poll of economists shows. Japan’s economy is estimated to grow 1.4 percent…..”

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“Australia’s dollar traded 0.6 percent from the lowest level since 2011 before U.S. data forecast to show improvements in consumer confidence and manufacturing amid speculation theFederal Reserve may slow stimulus.

The Aussie’s one-month volatility versus the greenback was near the highest since June. The currency rebounded against the yen, snapping a four-day slide, as technical indicators signaled recent losses were excessive. Chairman Ben S. Bernanke said last week the Fed may slow quantitative easing if there are signs of sustained economic growth. Demand for the Australia and New Zealand currencies was limited on prospects slowing Chinese output will curb the South Pacific nations’ exports.

“It would be interesting to see whether the expectations will continue for the Fed to wind down QE,” said Janu Chan, a Sydney-based economist at St. George Bank Ltd. “There’s a bit of uncertainty about China. Chinese data this week could increase the chance of the RBA cutting sooner rather than later. I wouldn’t rule out Aussie falling further,” Chan said, referring to the Reserve Bank of Australia.

The Australian dollar was little changed at 96.40 U.S. cents as of 3:10 p.m. in Sydney from 96.34 yesterday. It reached 95.82 on June 1, the lowest since October 2011. The currency’s one-month implied volatility was at 11.160 percent from 11.255 percent yesterday, when it reached 11.375, the highest since June 26…..”

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“The dollar rose against most of its major peers before U.S. data today that economists say will show consumer confidence improved and home prices gained.

The Dollar Index climbed amid prospects improving U.S. fundamentals will prompt the Federal Reserve to taper its monthly bond purchases of $85 billion. The yen snapped a three-day advance versus the euro as Asian stocks rose and after the Bank of Japan estimated a key component of funds in the nation’s economy reached a record amid unprecedented stimulus.

“This is an unsustainable pace of Fed purchases, and we have to accept that’s not good monetary policy, so I think tapering does start in the fourth quarter this year,” said Robert Rennie, chief currency strategist at Westpac Banking Corp. (WBC) in Sydney, referring to a reduction in U.S. monetary stimulus. “On a medium-term basis, the dollar is a buy.”

The greenback jumped 1 percent to 101.97 yen as of 6:37 a.m. in London from yesterday and added 0.1 percent to $1.2923 per euro. The yen slid 0.9 percent to 131.78 per euro.

The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against currencies of six major U.S. trading partners, added 0.1 percent to 83.799. Markets in the U.S. and U.K. were closed yesterday for public holidays….”

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“The euro strengthened for a second day against the dollar after an industry report showed German business confidence unexpectedly increased in May, adding to optimism the region’s biggest economy is improving.

The 17-nation currency extended its biggest weekly advance in seven weeks as a separate report forecast German consumer sentiment will improve in June. The yen extended its biggest weekly gain versus the dollar since June after Bank of Japan Governor Haruhiko Kuroda said the central bank had announced sufficient monetary easing. Australia’s dollar weakened against all of its 16 major counterparts as HSBC Holdings and Goldman Sachs Group Inc. predicted it would weaken….”

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“Australia’s dollar held its biggest gain in two months against the greenback before Federal Reserve Chairman Ben S. Bernanke speaks in Congress tomorrow.

The so-called Aussie has rebounded from its worst two-week loss in more than a year as traders bet Bernanke may counter speculation U.S. policy makers are closer to reducing bond purchases. The currency fell earlier before the Reserve Bank of Australia released minutes from this month’s meeting when it cut interest rates to a record. New Zealand’s kiwi dollar rose, building on its biggest advance in eight months.

“The way I see Bernanke playing this is that he’s just going to come out and defend his easy policies,” said Chris Weston, the chief market strategist at IG Markets in Melbourne. “People are looking to cover shorts on the Aussie dollar ahead of that, and that’s why we’re seeing the move up.” A short position is a bet that an asset will decrease in value. Weston said he expectsAustralia’s currency to strengthen toward 98.70 U.S. cents….”

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“The yen weakened against the dollar after Japan’s economy minister backed away from comments that drove the currency to its biggest gain in three weeks. The pound slumped and European stocks fell while grains and precious metals led commodities lower.

Japan’s currency dropped 0.5 percent to 102.78 per dollar at 7:26 a.m. in New York. The pound depreciated 0.7 percent to $1.5147, a six-week low, after U.K. inflation slowed more than economists forecast in April. The Stoxx Europe 600 Index declined 0.5 percent and Standard & Poor’s 500 Index futures lost 0.2 percent. Corn, wheat and gold lost more than 1 percent. The 10-year Treasury yield slid one basis point to 1.95 percent…”

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“Japan’s Economy Minister Akira Amari said a further slide in the yen would have negative effects after the currency’s 21 percent drop in the past six months, and signaled concern at the prospect of higher bond yields.

The yen was the biggest loser among 16 major currencies in the past six months, as Prime Minister Shinzo Abe pledged to beat deflation and the Bank of Japan doubled monthly bond purchases. Amari declined to comment on an appropriate exchange rate for the yen or say if it has declined so much that its negative effects need to be contained. The currency touched 103.31 per greenback on May 17, the weakest since October 2008, and rose 0.4 percent to 102.80 as of 8:30 a.m. in Tokyo.

“It’s being said excessive yen gains have been corrected a lot,” Amari said on the public broadcaster NHK yesterday. “If the yen extends losses a lot, people’s lives will be negatively affected. It’s our job to minimize that.”

Import prices for Japan rose 9.5 percent in April from a year earlier, while Japan’s Nikkei 225 Stock Average surged 66 percent since November, the most among developed markets. The government must demonstrate a commitment to fiscal rehabilitation to boost the credibility of government bonds, Amari said. Benchmark yields advanced last week to the highest levels in more than a year.

“As stocks have rallied this much, it’s a common economic phenomenon and principle that capital shifts from bonds to stocks,” Amari said. “We need to enhance the credibility of government bonds to prevent a rise in long-term yields.”

Bond Yields….”

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“The Dollar Index rose to the highest level since July 2010 while South African and Australian currencies fell on speculation the Federal Reserve will scale back stimulus measures. U.S. stock-index futures gained while gold dropped.

The gauge of the U.S. currency against six trade partners added 0.7 percent to 84.173 at 8:49 a.m. in New York. The rand sank to its weakest level since April 2009 and the Aussie slid to the lowest in almost a year. Spain’s 10-year bond yield fell eight basis points. Standard & Poor’s 500 Index futures climbed 0.4 percent. The Stoxx Europe 600 Index added 0.1 percent. Gold fell for a seventh day, the longest slump in four years…..”

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“The dollar strengthened before reports economists said will show manufacturing in the Philadelphia region expanded, while first-time jobless claims were near the lowest since January 2008.

The U.S. currency rose against all its 16 major counterparts after Federal Reserve Bank of Philadelphia President Charles Plosser said he favors phasing out the central bank’s asset purchases. The euro weakened for a sixth day against the greenback, the longest losing streak in 12 months, after a report confirmed consumer-price inflation in the region slowed to the least in three years in April. Australia’s dollar slid to an 11-month low as commodity prices declined.

“There’s been a change in expectations with respect to the dollar,” said Jane Foley, a senior currency strategist at Rabobank International in London. “May has brought news which is more constructive. If the U.S. continues notching better growth data, it brings in the likelihood that the Fed will start paring its asset purchases.”

The dollar rose 0.4 percent to 102.68 yen at 7 a.m. in New Yorkafter climbing to 102.76 yesterday, the strongest since October 2008. The U.S. currency appreciated 0.2 percent to $1.2867 per euro after reaching $1.2843 yesterday, the strongest since April 4. The six-day gain is the longest since May 2012. The single currency advanced 0.3 percent to 132.11 yen.

Manufacturing Expands

The Fed Bank of Philadelphia’s general economic index rose to 2 in May from 1.3 the prior month, according to the median estimate of economists in a Bloomberg survey. Initial jobless claims were at 330,000 in the week through May 11, U.S. Labor Department data will say today, a separate Bloomberg survey showed. That compares with a reading of 323,000 a week earlier, the least since January 2008….”

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Australia’s dollar fell to an 11-month low after the premium the nation’s bonds offer over U.S. debt shrank to the least in a year, sapping the allure of the currency as a higher-yielding asset.

The extra rate investors get by holding the South Pacific nation’s 10-year notes instead of similar-maturity Treasuries dropped to 1.27 percentage points yesterday, the lowest since June 2012. Yields on U.S. securities reached a two-month high this week amid speculation theFederal Reserve may consider tapering bond purchases as the economy improves.

“For the remainder of the week, the Aussie dollar will be quite heavy,” said Joseph Capurso, a Sydney-based foreign-exchange strategist at Commonwealth Bank of Australia, the nation’s biggest lender by market value. “The U.S. dollar will remain quite firm, I think U.S bond yields will continue to lift a bit further.”

The Australian dollar lost 0.3 percent to 98.63 U.S. cents as of 5:29 p.m. in Sydney after touching 98.52, lowest since June 12 last year. The currency extended its decline to an eighth day, the longest run of slides since August 2011. New Zealand’s currency was little changed at 81.90 U.S. cents.

The yield on Australia’s 10-year note gained three basis points, or 0.03 percentage point, to 3.27 percent today. Traders see about a 60 percent chance that the Reserve Bank of Australia will lower the benchmark rate within three months after cutting it to a record 2.75 percent on May 7, according to data compiled by Bloomberg on overnight-index swaps.

RBA Policy….”

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“Australia’s dollar declined toward an 11-month low after a private report showed business confidence slid amid bets that the Reserve Bank will cut interest rates further to curb the currency’s strength.

The so-called Aussie weakened against most of its 16 major peers after Barclays Plc cut its forecast for the currency, citing Australia’s falling yield advantage. New Zealand’s dollar held a five-day loss versus the U.S. greenback as the premium on the South Pacific nation’s 10-year note rate over Treasuries was near a four-year low.

“The Australian dollar has a little bit more room to decline,” said Takuya Kawabata, an analyst at Gaitame.com Research Institute Ltd. in Tokyo, a unit of Japan’s largest currency margin-trading company. “A recovery in the Aussie above $1 and a further advance would fan speculation the RBA will cut borrowing costs again.”

Australia’s dollar lost 0.4 percent to 99.86 U.S. cents as of 4:14 p.m. in Sydney after touching 99.61 on May 10, the weakest since June 14 and halting a record 10-month stretch of trading above parity. New Zealand’s currency was little changed at 83.03 U.S. cents.

The extra yield that investors receive to hold New Zealand’s benchmark 10-year note instead of similar-maturity Treasuries was at 1.44 percentage points after falling to 1.42 on May 3, the least since January 2009…..”

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“Japanese stocks rose, with the Topix Index extending a 4 1/2-year high, as the yen weakened past 102 against the dollar after the Group of Seven signaled tolerance for the currency’s drop.Nissan (7201) Motor Co. and Panasonic (6752) Corp. jumped after posting earnings.

Brokerages rose the most among the 33 Topix industry groups, with Nomura Holdings Inc. surging 9.6 percent. Nissan added 4.5 percent after the automaker forecast net-income to grow 23 percent based on an assumption the yen will trade at 95 to the dollar. Panasonic gained 7.6 percent after the electronics maker topped estimates for operating profit. Sharp Corp. climbed 12 percent after the Nikkei newspaper reported the money-losing TV maker plans to pare its European operations.

The Topix advanced 1.8 percent to close at 1,232.20 in Tokyo, the highest close since Aug. 29, 2008. More than nine stocks gained for every seven that fell. The Nikkei 225 Stock Average (NKY) added 1.2 percent to 14,782.21, with volume 42 percent above the 30-day average.

“G-7 has given a nod to Japan’s measures to beat deflation,” said Kuninobu Takeuchi, Tokyo-based executive portfolio manager at DIAM Co, which oversees the equivalent of about $98 billion. “Exiting deflation means growth, enabling companies to expand. Companies tend to put forward conservative profit forecasts, say a 30-40 percent increase, while the market is pricing growth of 40-50 percent.”

The Topix and the Nikkei have been the top-performing major equity gauges since mid-November, advancing more than 70 percent amid unprecedented monetary easing from theBank of Japan and calls from Prime Minister Shinzo Abe to end deflation.

Brokerages Rally…”

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“The yen weakened beyond 101 per dollar for the first time since April 2009 after a government report showed Japanese investors boosted holdings of overseas bonds, ending the longest streak of sales since January 2010.

Japan’s currency fell against all of 16 major counterparts as the data boosted speculation stimulus measures spearheaded by Bank of Japan Governor Haruhiko Kuroda and Prime Minister Shinzo Abe are driving local investors to seek higher returns overseas. Switzerland’s franc, also seen as a haven, dropped to a three-month low against the euro. The Australian dollar dropped below parity with its U.S. peer after the Reserve Bank this week cut interest ratesto a record….”

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