The yen weakened beyond 100 per dollar for the first time in a month as global demand for the greenback increased amid speculation the Federal Reserve will reduce monetary stimulus while the Bank of Japan sustains it.
The euro fell toward a four-week low against the dollar as producer prices in the 17-nation region unexpectedly declined. The U.S. currency gained versus most major peers as factory orders increased more than forecast, boosting bets the world’s biggest economy is improving fast enough for the Fed to start slowing bond purchases. Australia’s dollar weakened as the nation’s central bank said the currency may depreciate.
“When dollar-yen went through 100 it set off a whole host of alarm bells around the world for people who were looking to buy dollar-yen,” Neil Jones, head of European hedge-fund sales at Mizuho Bank in London, said in a telephone interview. “Stimulus is set to remain in Japan, and convergently it is set to taper off in the U.S.”
Japan’s currency depreciated 0.8% to 100.44 per dollar, the weakest level since June 5, before trading at 100.36 at 10:10 a.m. New York time, down 0.7%. The euro declined 0.4% to $1.3009 and touched $1.2990. It slid to $1.2985 on June 26, the weakest level since June 3. The euro appreciated 0.3% versus the yen to 130.56.
South Africa’s rand gained versus all of its 16 most-traded counterparts on optimism a pact between labor unions and mining companies will boost growth. The currency increased 0.4% to 9.8986 per dollar after rising as much as 0.7%.
The Brazilian real fell as industrial production contracted more than analysts forecast, damping speculation policy makers will accelerate the pace of borrowing-cost increases. The real declined 0.6% to 2.2431 per dollar after reaching 2.2480, its weakest level since June 24.
Canada’s dollar dropped to the weakest since October 2011 before the report that’s forecast to show U.S. manufacturing picked up in May, adding to evidence a strengthening American economy is outpacing its neighbor. The loonie, as the currency is nicknamed, sank 0.6% to C$1.0559 per U.S. dollar and touched $1.0578.
Euro-area producer prices slipped 0.1% in the 12 months through May after a 0.2% annual drop in April, the European Union’s statistics office in Luxembourg said today. Economists had projected that prices would stay stable, according to a Bloomberg survey.
The European Central Bank will keep its main refinancing rate at a record-low 0.5% on July 4, according to the median prediction of 62 economists in a Bloomberg survey. Policy “will stay accommodative for the foreseeable future,” ECB President Mario Draghi said in Paris on June 26.
The Dollar Index, which IntercontinentalExchange Inc. uses to monitor the greenback against the currencies of six major U.S. trade partners, touched 83.498, the highest since May 31.
Orders placed with U.S. factories increased 2.1% in May, following a revised 1.3% advance the prior month, the Commerce Department reported in Washington. The median forecast of economists in a Bloomberg survey called for a 2% gain. Demand for capital equipment increased more than the government estimated last week.
“The dollar is likely to stay underpinned if data continues to improve,” said Roberto Mialich, a senior currency strategist at UniCredit SpA in Milan. “We see scope for the Fed to be able to start tapering the policy accommodation this year before Fed Chairman Bernanke departs early next year.”
The dollar has climbed 6.7% this year, the best performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro was the second- biggest winner, rising 4.9%.
Australia’s dollar fell toward an almost three-year low against the U.S. currency after Reserve Bank Governor Glenn Stevens said “it is possible that the exchange rate will depreciate further over time.”
Stevens spoke after policy makers left the benchmark interest at a record-low 2.75%. Traders see about a 39% chance they will cut its key rate next month, based on swaps data compiled by Bloomberg.
“The RBA’s jawboning has worked quite well,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “This is probably as large a selloff in the Aussie as you could expect, given that they didn’t touch interest rates. They are probably happy that they can still get a bit of bang for their buck when it comes to the statement.”
The Aussie dropped 0.9% to 91.58 U.S. cents after touching 91.10 yesterday, the lowest since September 2010.