Dollar gains on demand for riskier assets

The Dollar Index advanced from an almost one-month low as a rally in equities worldwide signaled sustained investor appetite for risk and demand for U.S. assets.

Japan’s currency depreciated to more than 100 per dollar after climbing to the strongest in three weeks yesterday. Australia’s dollar declined versus all of its 16 major counterparts after the nation’s central 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 trade deficit in the U.S. widened.

“If you look at equity markets today in Europe and overnight, it’s basically green,” Geoffrey Yu, a senior currency strategist at UBS AG in London, said in a phone interview. “In a positive-risk environment right now, clearly the dollar is responding favorably.”

The dollar gained 0.2% to $1.3049 per euro at 10:23 a.m. New York time. The yen fell 0.7% to 100.25 per dollar. It appreciated to 98.87 yesterday, the strongest since May 9. Japan’s currency declined 0.6% to 130.81 per euro.

Dollar Measure

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against currencies of six U.S. trading partners, rose 0.3% to 82.928 after adding as much as 0.4%. The gauge depreciated 0.9% yesterday, touching the lowest level since May 9.

The widening of the U.S. trade deficit in April to $40.3 billion from a more than three year low reflected a rebound in imports of consumer goods and business equipment that eases concern about the degree of slowing in economic growth.

The MSCI Asia Pacific Index of shares gained 1% and the Stoxx Europe 600 Index advanced 0.5%, while the Standard & Poor’s 500 Index gained 0.1%.

Japan’s currency weakened against the majority of its most- traded peers. Wages in the country rose by the most in a year in April, in a gain that supports Prime Minister Shinzo Abe’s campaign to reflate the world’s third-biggest economy after 15 years of falling prices.

“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.”

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