The dollar rose amid speculation Federal Reserve officials are still intending to slow the pace of asset purchases that have debased the currency.
The U.S. currency strengthened versus most of its major counterparts amid commentary from regional Fed presidents, one day after New York Fed President William C. Dudley said tapering was possible this year, depending on economic data. The Australian and New Zealand dollars weakened as Asian stocks declined, reducing demand for the region’s higher-yielding assets. The pound fell as a gauge of mortgage approvals rose less than forecast.
“Some people are taking short dollar positions off the table,” Douglas Borthwick, head of foreign exchange at Chapdelaine & Co. in New York, said in a telephone interview. “Yesterday, you saw a number of comments that made it seem that tapering was right on the cusp. Esther George will likely come out and move the taper issue even closer.” A short position is a bet that an asset will decline in value.
The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 major currencies, rose 0.2% to 1,014.09 at 10:29 a.m. New York time after climbing to the highest level since Sept. 18.
The U.S. currency gained 0.1% to $1.3475 per euro after strengthening 0.2% yesterday. The greenback fell 0.3% to 98.57 yen. The euro declined 0.4% to 132.79 yen.
The New Zealand dollar fell versus all 31 of its most- traded counterparts as declines in global stocks reduced investor appetite for higher-yielding assets. The MSCI Asia Pacific Index of shares fell 0.6%.
The so-called kiwi tumbled 1% to 82.93 U.S. cents after decreasing 1.3%, the most since Aug. 21. Australia’s dollar dropped 0.4% to 93.90 U.S. cents.
“The equity markets opened on a softer foot and we’re seeing a bit of weakness in the Aussie dollar as some risk comes off the table,” said Jim Vrondas, chief currency and payment strategist at OzForex Ltd. in Sydney. “I don’t expect it to have a long-lasting effect.”
Hungary’s forint depreciated against the majority of its major peers as the country’s central bank cut its benchmark interest rate to a record low after inflation slowed. The currency slid 0.6% to 222.67 per dollar and declined 0.5% to 300.01 per euro.
The dollar has weakened 3.5% this quarter versus the euro, headed for the biggest decline since the three months through March 2011. The greenback has dropped 0.4% against the yen in the same period.
The Kansas City Fed’s Esther George will speak later today as markets assess the central bank’s stance after it unexpectedly left its bond-purchases program unchanged when officials met on Sept. 17-18. Cleveland Fed President Sandra Pianalto spoke earlier and didn’t discuss her outlook for the economy or monetary policy.
Dudley said yesterday the economy “still needs the support of a very accommodative monetary policy,” and told CNBC today tapering would require improvement in the job market and economy. His Atlanta counterpart Dennis Lockhart said yesterday policy should focus on creating a more dynamic economy after a recent cooling in growth.
Markets are waiting for “more Fed comments or payrolls data, more direction on the timing of the taper,” said Jane Foley, senior currency strategist at Rabobank International in London. “Many people don’t have a strong view on that right now and they want to see what the next payrolls number will tell us before coming to a strong conclusion on the dollar.”
Twenty-four of 41 economists surveyed by Bloomberg News on Sept. 18-19 said the Fed will take its first step in slowing its bond purchases in December.
The dollar fell 2% in the past month, the biggest decline after the yen, according to Bloomberg Correlation- Weighted Indexes that track 10 developed-nation currencies. The yen slid 2.1% and the euro fell 1.2%.
The pound weakened for the third time in four days against the dollar after the British Bankers Association said loans approved for house purchases rose to 38,228 in August from a revised 37,428 the previous month. Economists surveyed by Bloomberg forecast 38,950.
“The pound has had a long rally recently on the back of strong U.K. data and a generally weaker dollar,” said Bernd Berg, a currency strategist at Credit Suisse Group AG in Zurich. “There is a lot of positive economic news priced into the pound. Any slight disappointment in economic data in the weeks ahead will lead to a reversal of the recent strength and a pull back towards $1.57.”
Sterling fell 0.3% to $1.5988 after climbing to $1.6163 on Sept. 18, the strongest since Jan. 11. The U.K. currency weakened 0.3% to 84.34 pence per euro.
Trading in over-the-counter foreign-exchange options totaled $11.3 billion, from $14.3 billion yesterday, according to data reported by U.S. banks to the Depository Trust Clearing Corp. and tracked by Bloomberg. Volume in options on the euro- yen exchange rate amounted to $1.8 billion, the largest share of trades at 16%. Options on the dollar-yen rate totaled $1.6 billion.
Euro-yen options trading was 385% more than the average for the past five Tuesdays at a similar time in the day, according to Bloomberg analysis. Dollar-yen options trading was 37% less than average.