Dollar weakens on Fed bond-purchase speculation

Fed News

Bernanke will hold a press conference in Washington following the Fed’s two-day meeting. He said on May 22 the central bank could reduce its monthly purchases of $45 billion of Treasuries and $40 billion of mortgage securities if the employment outlook shows sustainable improvement.

The benchmark 10-year Treasury yield climbed to 2.29% on June 11, the highest level since April 2012. It was little changed today at 2.18%.

The JPMorgan Global FX Volatility Index was at 10.58%. It climbed to a one-year high of 11.43% on June 13, while the average for the past 12 months is 8.65%.

“The message is very much nervous, choppy price action going into Bernanke,” said Robert Rennie, chief currency strategist at Westpac Banking Corp. in Sydney.

The yen has strengthened 6.6% in the past month, the best performer among 10 major currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro rose 2.1%, while the dollar fell 2.7%.

Swedish Growth

The krona rose for a second day after the Swedish National Institute of Economic Research said on its website the Riksbank will keep its benchmark interest rate at 1% this year. The $500 billion economy will grow 1.5% this year and 2.5% in 2014 after expanding 0.7% in 2012, it predicted, raising estimates from March.

A separate report showed the Swedish unemployment rate fell to 8.2% in May from 8.7% a month earlier. Economists had expected a reading of 8.8%, according to the median estimate in a Bloomberg survey.

“All in all good Swedish numbers that should further lower the probability for the Riksbank cutting in July,” strategists at Danske Bank A/S in Copenhagen wrote in an e-mailed note. “It points to a further move lower” in the euro against the krona, they wrote.

Sweden’s krona advanced 0.7% to 6.3962 per dollar after reaching the strongest level since April 16. It gained 0.7% to 8.5687 per euro after touching the most since June 5.

New Zealand’s dollar rose for the first time in four days after Statistics New Zealand said the nation’s current-account deficit narrowed in the first quarter to 4.8% of gross domestic product from 5% in the previous three months.

The kiwi climbed 0.4% to 80.22 U.S. cents after dropping 1.4% during the previous three days.

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