Dollar rises to 2-month high versus yen on Fed bets

Aussie, Krona

Australia’s dollar fell for a fourth day as an industry report showed business sentiment worsened last month.

A sentiment gauge among Australian businesses dropped to 5 in October from 12 the prior month, National Australia Bank Ltd. said. A measure of business conditions was unchanged at minus 4.

“The market has taken on board that things are improving perhaps not only not as fast as people thought, but not at all,” Ray Attrill, global co-head of currency strategy at National Australia Bank in Sydney. “The sentiment at the moment is a little bit bearish on the Aussie, which essentially means that news that can be seen as negative is likely to resonate.”

The Aussie dropped 0.5% to 93.17 U.S. cents after sliding to 93.12 cents, the lowest level since Oct. 1.

Sweden’s krona weakened to a 17-month low versus the euro after a report showed the nation unexpectedly returned to deflation last month, boosting speculation the central bank will cut interest rates.

The krona slid 1.4% to 8.9153 per euro after declining to 8.9266, the weakest since June 2012.

Economic Reports

The dollar extended gains after the Chicago Federal Reserve national index rose to 0.14 in September from a revised 0.13 the month before, with 47 of the 85 monthly individual indicators making positive contributions.

The greenback rose 0.6% last week after a gain of 204,000 workers in October topped all forecast in a Bloomberg survey. First-time jobless claims dropped to 330,000 last week from 336,000 the previous week, a separate survey showed before the report tomorrow.

The Bloomberg U.S. Financial Conditions Index, which combines everything from money-market rates to yields on government and corporate bonds to equity volatility, climbed 0.4% to 1.825, set for the highest closing level in data starting in January 1994.

The dollar has gained 4.3% this year, according to Bloomberg Correlation-Weighted Indexes that track 10 developed- nation currencies. The yen tumbled 11%, while the euro appreciated 6.4%.

100 Yen

The yen declined against most of its major counterparts today before the Cabinet Office reports tomorrow that Japan’s economic growth slowed to 0.4% in the third quarter from 0.9% in the previous three months, according to a Bloomberg News survey.

“There’s a strong chance that the dollar hits 100 yen in the next day or so,” said Adam Myers, European head of foreign- exchange strategy at Credit Agricole Corporate & Investment Bank in London. “The dollar will move higher versus the yen as the market will bring forward its estimate for U.S. tapering.”

The dollar will appreciate to 103 yen in six months and 105 within a year, Myers said, citing Credit Agricole’s forecasts. It hasn’t reached 105 since October 2008.

Policy makers will pare the monthly pace of bond buying to $70 billion at their March 18-19 meeting from the current pace of $85 billion, according to the median of 32 economist estimates in a Bloomberg News survey on Nov. 8. The median forecast in an Oct. 17-18 survey of 40 economists also called for a reduction to $70 billion in March.

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