Dollar falls to 1-month low on Fed speculation

Rand Bid

“There is very strong global risk appetite after the announcement that Summers is no longer running,” said Mohammed Nalla, head of strategic research at Nedbank Group Ltd. in Johannesburg. The rand may advance to 9.65 per dollar after breaching key technical levels, he said.

Obama had mentioned Summers and Fed Vice Chairman Janet Yellen as candidates to lead the Fed after Ben S. Bernanke’s term as chairman expires Jan. 31, with policy makers preparing to reduce bond purchases, known as quantitative easing. Summers until yesterday was the president’s favorite.

Twenty U.S. senators, including 19 Democrats and one independent, signed a letter of support for Yellen in July.

“It’s the Summers thing mainly and then perhaps to some extent behind that as well there’s the agreement on Syria,” said Steve Barrow, head of Group-of-10 research at Standard Bank Plc in London. “The dollar will probably stay a bit softer against the riskier currencies. The emerging-market currencies, or the riskier G-10 currencies of the Aussie, kiwi and Canadian dollar, are reasonably well set against the dollar.”

Fed Policy

The Federal Open Market Committee will slow its monthly asset purchases to $75 billion from $85 billion at a two-day meeting starting tomorrow, according to a Bloomberg News survey of economists on Sept. 6.

The JPMorgan G7 Volatility Index fell to 9.06, the lowest in five weeks. It’s below the average 9.57% this year.

“The anxiety about the FOMC and how much tapering we’re going to see; the nervousness about China’s slowdown, and really the shift to liquidity from EM bonds to safer markets -- those were the three key anxieties of the summer and I think those three risks have receded,” said Mike Moran, a senior currency strategist at Standard Chartered Plc in New York.

Turkey’s lira extended gains from last week as U.S. Secretary of State John Kerry tries to build support for a plan to find and destroy Syria’s chemical weapons. He will meet with French President Francois Hollande and the foreign ministers from France and the U.K. after negotiating an accord with Russian Foreign Minister Sergei Lavrov.

The lira rose 1.2% to 2.0045 per dollar.

Currency Ranking

The dollar has depreciated 0.6% in the past week, the worst performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen rose 0.9% the euro was little changed.

Trading in over-the-counter foreign-exchange options totaled $15 billion, compared with $16 billion on Sept. 13, according to data reported by U.S. banks to the Depository Trust Clearing Corp. and tracked by Bloomberg. Volume in options on the euro-dollar exchange rate amounted to $1.83 billion, the largest share of trades at 13%. Options on the dollar-yen rate totaled $1.82 billion.

Euro-dollar options trading was 21% more than the average for the past five Mondays at a similar time in the day, according to Bloomberg analysis. Greenback-yen options trading was 46% less than average.

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