Dollar at almost 5-year high vs. yen on Fed bets

Corruption Raid

The lira weakened 0.8% to 2.0434 against the dollar, the biggest decline among 24 emerging-market currencies tracked by Bloomberg.

Suleyman Aslan, CEO of Turkiye Halk Bankasi AS, and construction magnate Ali Agaoglu were also among those arrested by police investigating corruption in government tenders, Zaman newspaper said.

The Aussie dollar fell to a five-year low versus New Zealand’s currency as the Reserve Bank of Australia said in minutes of its most recent meeting that it maintained the option to cut interest rates.

The Aussie fell 0.5% to NZ$1.0780 after earlier touching the weakest since October 2008. It was 0.7% weaker at 88.86 U.S. cents.

“The downtrend in the Aussie-kiwi is still very much in play,” said Jonathan Cavenagh, a Singapore-based foreign- exchange strategist at Westpac Banking Corp. “The RBA continues to talk about the possibility that rates may need to be cut further.”

Hold Rates

While 34% of economists surveyed by Bloomberg forecast the Fed will reduce its monthly bond purchases at a two-day meeting starting today, futures traders bet it will keep interest rates at almost zero at least until the end of 2014.

Investors should sell the euro against the greenback if the Fed decides to cut bond purchases tomorrow, according to HSBC. The opposite wager should be made if tapering is coupled with “new dovish forward guidance initiatives,” or if the central bank keeps the program unchanged, the U.K. bank said in a report.

Traders see an 87% chance that the U.S. central bank will keep the federal-funds rate target at zero to 0.25% through next year, according to data on futures compiled by Bloomberg.

“Certainly the data has pointed toward a strengthening of the U.S. economy and that should make the Fed more comfortable to begin” reducing stimulus, said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “The market is certainly anticipating a potential taper tomorrow. The dollar may strengthen modestly against other major currencies if the Fed was to taper.”

U.S. inflation picked up in November. The consumer-price index was unchanged last month, following a 0.1% drop in October, official data showed today. Excluding food and fuel, the core measure rose 0.2%.

The dollar has strengthened 3.9% this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The yen declined 14.1%, the worst performer, while the euro advanced the most, gaining 8.6%.

www.bloomberg.com

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