Dollar gains as Fed official discusses stimulus-taper decision

The dollar rallied against the majority of its most-traded counterparts as Federal Reserve Governor Jeremy Stein said the central bank may make a decision in September about tapering monetary stimulus.

The yen fell to the weakest level versus the dollar since June 6 and 10-year Treasury yields rose as Fed officials sought to clarify policy on providing stimulus to the world’s biggest economy. The euro reversed gains and the International Monetary Fund said the currency made up the smallest share of allocated central-bank reserves since 2004.

Stein’s comments “really got Treasuries moving and got the dollar steam rolling,” Brian Kim, a currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit in Stamford, Connecticut, said in a telephone interview.

The dollar rose 1% to 99.28 per yen at 1:50 p.m. in New York. The greenback added 0.3% $1.3004 per euro. Japan’s currency weakened 0.7% to 129.10 per euro.

U.S. 10-year note yields rose five basis points, or 0.05 percentage point, to 2.52%.

Market Timing

South Africa’s rand has gained 1.8% to the greenback this month, while Australia’s dollar has declined 4.6%. This quarter, the euro has led all major gainers with a 1.4% increase, while the worst-performing Aussie has slipped 12.3%. The greenback is the best-performing currency in 2013 and the rand has plunged 14.5%.

India’s currency gained the most in nine months as investors reassessed projections for a reduction in U.S. stimulus. The rupee surged as much as 1.7%, the most since Sept. 21, before trading at 59.39 per dollar. That pared its drop this year to 7.4%.

The U.S. dollar was 62.2% of allocated reserves in the January-March period, compared with 61.2% the prior quarter, according to the IMF data. The euro’s share was 23.7%, compared with 24.2% in the fourth quarter of 2012, it showed.

Reserve managers around the world held about $194 billion in Australian and Canadian currencies, according to the first IMF data on the global holdings of the two currencies.

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