Dollar rises vs. major peers as outlook dims in Europe, U.S.

Krona, Aussie

Sweden’s krona was the worst-performing major currency against the dollar and the euro amid rising speculation the central bank will cut interest rates again at the end of the month. A survey showed Sweden’s services economy contracted in September, sinking at the fastest pace since August 2009.

The krona fell 1.1 percent to 6.6836 per dollar. It weakened 1 percent to 8.6202 per euro.

Australia’s dollar sank today after data showed the nation’s trade deficit for August was almost three times wider than the median forecast of economists. Imports exceeded exports by A$2.03 billion ($2.07 billion) in August, compared with a revised A$1.53 billion shortfall in July.

In China, Australia’s biggest trade partner, data today showed non-manufacturing industries grew at the weakest pace since at least March 2011, fanning speculation the Reserve Bank of Australia will lower interest rates again following a quarter-point reduction yesterday.

‘Cut Again’

“The Reserve Bank will cut again probably next month,” said Joseph Capurso, a strategist at Commonwealth Bank of Australia in Sydney. “I don’t think the RBA will cut as much as the market is expecting, but those expectations have been one thing that has pushed the Aussie down.”

The Aussie dollar dropped as much as 0.7 percent to $1.0198, the weakest level since Sept. 6.

A composite index based on a survey of euro-area services and manufacturing purchasing managers fell to 46.1 from 46.3 in August, London-based Markit Economics said today. That’s above an initial estimate of 45.9 published on Sept. 20. A reading below 50 indicates contraction.

ECB officials meet tomorrow in Ljubljana, Slovenia, with policy makers forecast to keep the bank’s benchmark interest rate unchanged at a record-low 0.75 percent, according to a Bloomberg survey of economists.

The euro remained higher against most major peers even after Spanish Prime Minister Mariano Rajoy yesterday denied immediate plans to ask for a bailout in response to mounting speculation that a request was imminent.

The shared currency has strengthened 1.6 percent in the past month, according to Bloomberg Correlation Weighted Indexes. The dollar declined 1 percent and the yen slid 1.3 percent.

Japan Meeting

The yen fell against the dollar and euro before the Bank of Japan begins its policy meeting tomorrow. Officials expanded the Japanese central bank’s asset-purchase program last month in a bid to stimulate economic growth.

Japan’s new Economy Minister Seiji Maehara this week pledged a closer watch over the BOJ to ensure it meets its 1 percent inflation goal, adding that purchases of foreign bonds may be a powerful tool for easing.

The dollar may climb toward its highs in August and September versus the yen, MacNeil Curry, New York-based chief rates and currencies technical strategist at Bank of America Corp. wrote in a report yesterday.

A break above resistance at 78.18 to 78.24 “reinvigorates the uptrend” for dollar-yen, Curry wrote. Resistance is a level where orders to sell may be clustered. The greenback peaked at 79.66 yen on Aug. 20 and rose to as high as 79.22 on Sept. 19, according to data compiled by Bloomberg.

Bloomberg News

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