Dollar declines as Fed report shows economy slowing

Won, Stocks

The South Korean won jumped for a second day along with stocks, boosting demand for emerging-market currencies.

The won appreciating 0.4% to close at 1,063.53 per dollar in Seoul. The MSCI Asia Pacific Index of regional stocks advanced for a second day, climbing 1.2%. The Stoxx Europe 600 Index gained 0.2%.

“They’re all up today,” Lewis of Samson Capital said of currencies associated with growth and commodities.

The dollar weakened as the New York Fed Empire Report fell to minus 2.21 from 1.5 the previous month. The media forecast in a Bloomberg survey was for a gain to 5. Negative readings signal contraction in New York, northern New Jersey and southern Connecticut.

Total industrial production in the U.S. fell 0.1% in October as output at mines and utilities declined. The median forecast in a Bloomberg survey called for a 0.2% rise.

Central Banks

Yellen said yesterday the central bank’s key interest rate, at a record zero to 0.25%, would remain low even after policy makers start to reduce monetary easing. The Fed has kept its benchmark for borrowing costs near zero since December 2008.

The Federal Open Market Committee that Yellen is poised to lead is considering whether to begin slowing its $85 billion monthly bond-purchase program. Officials will decide to pare the purchases to $70 billion a month at their March 18-19 meeting, according to the median of 32 economist estimates in a Bloomberg News survey on Nov. 8.

The yen weakened beyond 100 per dollar yesterday for the first time since September as Japan’s gross domestic product growth slowed to an annualized 1.9% in the July-September period from 3.8% in the second quarter.

BOJ policy makers meet Nov. 20-21. Almost three-quarters of economists surveyed by Bloomberg expect the central bank will add to stimulus in the first half of next year.

The yen slumped 1.5% in the past week, the worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar dropped 0.2% and the euro gained 0.8%.

A gauge of currency swings measured by the JPMorgan Global FX Volatility Index slid nine basis points, or 0.09 percentage point, to 8% after touching a one-month high of 8.57% on Nov. 12.

“It’s generally a more risk-on environment,” said Kiran Kowshik, a foreign-exchange strategist at BNP Paribas SA in London. “That’s why you’re seeing the yen weakening. Yellen’s testimony has sparked a risk-on move.”

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