Dollar Gains as Fed Minutes Signal Unabated Tapering; Baht Falls

The dollar gained the most in three weeks after Federal Reserve policy makers signaled emerging-market turmoil and economic reports that have fallen short of forecasts won’t interrupt stimulus-tapering plans.

The U.S. currency strengthened versus most of its 16 major peers, including those of commodity producers Canada and Australia, as Treasury yields rose after “several” central bank officials said “there should be a clear presumption in favor of continuing” the pace of bond-buying reductions, barring a change in the economic outlook. Emerging-market currencies weakened as anti-government protests escalated in Ukraine and Thailand.

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major counterparts, added 0.3 percent to 1,020.16 as of 5 p.m. in New York, the largest increase on a closing basis since Jan. 30.

The yen rose 0.1 percent to 102.31 per dollar after dropping 0.4 percent yesterday, and Japan’s currency rose 0.2 percent to 140.51 per euro. The dollar gained 0.2 percent to $1.3733 per euro after sliding to $1.3739.

(Source: Bloomberg)

Yen Slides as Bank of Japan Boosts Lending; Forint Declines

The yen slid to the weakest this month against the dollar and the euro after the Bank of Japan boosted its lending programs and said it will maintain monetary easing to stamp out deflation.

The dollar erased gains against a basket of peers after a gauge of manufacturing growth slowed more than forecast. Hungary’s forint declined versus most of its main counterparts as the central bank dropped the two-week deposit rate to a record low. The Thai baht fell with most emerging-market currencies as police clashed with protesters in Bangkok. Investors outside the U.S. increased holdings of Treasuries the most since 2011.

The yen fell 0.4 percent to 102.36 per dollar at 5 p.m. in New York after depreciating to 102.74, the weakest level since Jan. 31. Japan’s currency slid 0.8 percent to 140.83 per euro and reached 141.03, lowest since Jan. 29. The dollar fell 0.4 percent to $1.3759 per euro and touched $1.377, weakest since Jan. 2.

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 of its major counterparts, was little changed at 1,017.34.

(Source: Bloomberg)

Aussie-Driven Inflation Spurring Worst Bonds: Australia Credit

Australia’s central bank is signaling its success in weakening the currency will spur inflation, adding to pressure on the developed world’s worst-performing bonds.

A surge in yields since Feb. 4 pared returns for the past six months to 1.2 percent, an index of debt due in more than a year shows, the smallest gain of 22 advanced-economy markets tracked by the European Federation of Financial Analysts Societies and Bloomberg. Inflation may reach a two-year high 3.25 percent, the Reserve Bank of Australia said this month. Assistant Governor Christopher Kent said Feb. 14 accelerating economic growth may drive costs higher.

The real yield on Australian bonds after accounting for consumer-price gains will be less than investors earn from Treasuries if the RBA is correct. Policy makers raised their forecast after the currency weakened 14 percent in 2013 and housing costs rose to a record, boosting the odds RBA Governor Glenn Stevens’ next move will be a rate increase.

The RBA dropped its easing bias at the Feb. 4 policy meeting and said inflation last quarter was stronger than expected, possibly because the impact of a lower exchange rate was being passed on more rapidly than anticipated.

(Source: Bloomberg)