The dollar rose against most of its major peers after a report showed U.S. retail sales in February exceeded forecasts, bolstering optimism in the world’s largest economy.
The euro weakened as Italian borrowing costs rose at a debt sale. The Reserve Bank of New Zealand is expected to keep the country’s key interest rate at an all-time low at a policy meeting today. Japan’s currency rose versus the majority of its most-traded peers after the country’s largest opposition party said yesterday it would vote against deputy governor nominee Kikuo Iwata, who advocates more easing.
“It’s a good reaction to the positive data figure, which helps the dollar,” Brian Kim, a foreign-exchange strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit in Stamford, Connecticut, said in a telephone interview. “We have seen an overall better data, stronger dollar relationship, and that holds right here.”
The dollar appreciated 0.5% to $1.2965 against the euro at 9:07 a.m. in New York. It fell 0.2% to 95.94 yen after earlier falling as much as 0.7%. The 17-nation currency declined 0.6% to 124.43 yen.
Economic Data
The 1.1% retail sales advance exceeded all projections in a Bloomberg survey and followed a revised 0.2% gain in January, Commerce Department figures showed today in Washington. The median forecast was for a 0.5% advance. Sales excluding the volatile categories of autos and gasoline rose 0.4%.
“We only see definitive signs of recovery in the U.S. and nowhere else,” Stephen Jen, managing partner at SLJ Macro Partners LLP, said at Bloomberg Link’s FX Debates in London. “In the world where growth is decoupling and the U.S. is leading the world into a recovery, the dollar will perform quite well as risk capital is attracted into the U.S. It’s very hard to short the dollar now.”
The Your Party said today it will oppose Haruhiko Kuroda’s nomination for BOJ governor and Hiroshi Nakaso for deputy, while supporting Iwata. The Japan Restoration Party said it will endorse Kuroda and Iwata and oppose Nakaso. The main opposition Democratic Party of Japan said yesterday it opposed Iwata because he advocates changing the central bank law to give the government more control in setting policy.
‘Yen Correction’
“The objection to Iwata’s nomination is being used as an excuse for the yen correction,” said Daisaku Ueno, a senior foreign-exchange and fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo.
Current Governor Masaaki Shirakawa is due to step down along with his two deputies on March 19. Iwata may be confirmed without backing from the DPJ if Prime Minister Shinzo Abe can secure the support of the smaller opposition parties.
The three-month dollar-yen risk reversal rate slid as low as minus 0.145%, the least since June 4, indicating increased demand for options that grant the right to buy Japan’s currency versus the greenback.
The yen has slumped 7.6% this year, the worst performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes amid expectations a new BOJ leadership will boost cash infusions. The dollar rose 3.1% against their developed-market peers on signs the U.S. recovery is gathering pace.
Recovery Signs
The euro fell for a second day against the dollar after Italian borrowing costs increased at a debt sale amid concern a political deadlock in the country will derail plans to implement austerity measures.
Italy sold 3.32 billion euros of a 2015 note at 2.48%, up from the 2.30% at the prior auction on Feb. 13. The Treasury sold 2 billion euros of securities maturing in 2028 at 4.90% versus with 4.805% when the bonds were sold via banks on Jan. 15.
New Zealand’s dollar dropped for a second day versus the U.S. currency after Finance Minister Bill English said yesterday the dry weather could hurt economic growth.
Drought declarations were extended to most of North Island last week, including the nation’s biggest milk-producing region. Food prices fell 0.3% last month after increasing 1.9% in January, official data showed today.
“The drought continues to worsen on an almost daily basis, placing downward pressure on the New Zealand dollar,” said Mike Jones, a currency strategist at Bank of New Zealand in Wellington. “There’s no doubt that growth in the first half of this year will be weaker as a result of the drought.”
The so-called kiwi weakened 0.3% to 82.43 U.S. cents after declining to 81.88 cents on March 8, the lowest level since Dec. 28.
