The yen and the Swiss franc were the top two performers against the dollar as Libya’s uprising drove oil to a 29-month high, spurring demand for the safest assets.
The franc reached a record high versus the dollar and the yen had the biggest weekly jump against the U.S. currency this year as investors sought stability. The euro gained versus the greenback on bets the European Central Bank will try to stem inflation from rising fuel costs by increasing interest rates before the Federal Reserve. The ECB meets March 3.
“Risk on oil and interest rates were driving the market this week,” said Greg Salvaggio, senior vice president of capital markets at currency-trading firm Tempus Consulting Inc. in Washington. “The Swiss franc has always been the go-to safety currency.”
The yen strengthened 1.8 percent to 81.68 per dollar in New York, the most since a 2.2 percent gain in the five days ended Dec. 31, from 83.18 on Feb. 18. It gained 1.4 percent against the euro to 112.35.
The franc appreciated 1.8 percent to 92.81 centimes per dollar, from 94.46 a week earlier. It touched 92.27 centimes yesterday, the strongest level since at least 1971, when Bloomberg records begin. The Swiss currency rose 1.3 percent to 1.2768 per euro, from 1.2935.
The franc and the yen tend to strengthen during periods of financial stress because their export-reliant economies don’t need foreign capital to balance current accounts -- the broadest measure of trade.
The euro rose 0.5 percent to $1.3754, from $1.3693. It reached $1.3838 yesterday, the highest level since Feb. 2.
Libyan Violence
Libya’s leader, Muammar Qaddafi, lost control of much of his country’s oil-rich east amid a wave of violence. Protests have erupted in North Africa and the Mideast since last month’s ousting of Tunisian President Zine El Abidine Ben Ali and the Feb. 11 fall of Egyptian President Hosni Mubarak.
Crude oil for April delivery in New York climbed 14 percent this week, the most in two years, to $97.88 a barrel on concern supplies would be disrupted. It reached $103.41 on Feb. 24, the most since September 2008, before trimming its advance after Saudi Arabia, the U.S. and the International Energy Agency said they can compensate for a supply disruption.
The yen also gained versus the greenback as investors sought safety in U.S. Treasuries, pushing yields down and making dollar-denominated assets less attractive. Benchmark U.S. 10- year note yields fell 17 basis points to 3.41 percent, the biggest weekly loss since May. A basis point is 0.01 percent.
Dollar Index
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners including the yen and euro, fell 0.5 percent for the week, its second straight five-day decline.
The greenback extended losses against its Australian counterpart yesterday as the U.S. economy expanded in the fourth quarter more slowly than first estimated. Gross domestic product grew at a 2.8 percent annual pace, Commerce Department data showed, compared with an earlier estimate of 3.2 percent.
The U.S. unemployment rate increased to 9.1 percent in February from 9 percent the previous month, economists in a Bloomberg survey forecast before the Labor Department reports the data on March 4.
“Anything that is going to indicate that it is going to take longer for a self-sustained U.S. recovery is going to prolong rate hikes and is going to demean the dollar,” said Jessica Hoversen, a Chicago-based analyst at the futures broker MF Global Holdings Ltd.
Rate Bets
The euro gained against the dollar as traders added to bets for higher borrowing costs in Europe amid the surge in crude. The implied yield on the three-month Euribor futures contract for December reached 1.97 percent on Feb. 23, from 1.88 percent a week earlier.
“Inflation indeed has been rising, and that is very much the effect of increasing energy prices that drive upwards these figures,” Amadeu Altafaj, a spokesman for the European Commission, told reporters in Brussels on Feb. 24.
The ECB has held its key rate at 1 percent since May 2009. The Fed has kept its benchmark at zero to 0.25 percent since December 2008, and policy makers reiterated last month it will stay low for an “extended period.”
Futures on the CME Group Inc. exchange yesterday showed a 35 percent probability the Fed will boost its rate in December, versus a 41 percent chance a week earlier.
ECB Outlook
ECB President Jean-Claude Trichet told reporters on Feb. 23 that policy makers will take the decisions necessary to maintain price stability in the euro region. All 52 economists in a Bloomberg News survey forecast the ECB will keep its rate unchanged this week.
“The euro is at relatively high levels, and there needs to be some sort of new stimuli for it to break decisively clear of its recent highs,” said Nick Bennenbroek, head of currency strategy at Wells Fargo & Co. in New York. “The market will be watching the ECB and Mr. Trichet, and we’ll see if the euro survives expectations.”
New Zealand’s dollar, nicknamed the kiwi, was the worst performer versus the greenback this week as investors speculated a 6.3 magnitude earthquake that struck Christchurch would hurt the country’s economy.
The kiwi fell 1.3 percent to 75.16 U.S. cents. It rose yesterday, paring the loss, as Standard & Poor’s said the quake would have no immediate effect on the nation’s credit rating.
To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
The franc reached a record high versus the dollar and the yen had the biggest weekly jump against the U.S. currency this year as investors sought stability. The euro gained versus the greenback on bets the European Central Bank will try to stem inflation from rising fuel costs by increasing interest rates before the Federal Reserve. The ECB meets March 3.
“Risk on oil and interest rates were driving the market this week,” said Greg Salvaggio, senior vice president of capital markets at currency-trading firm Tempus Consulting Inc. in Washington. “The Swiss franc has always been the go-to safety currency.”
The yen strengthened 1.8 percent to 81.68 per dollar in New York, the most since a 2.2 percent gain in the five days ended Dec. 31, from 83.18 on Feb. 18. It gained 1.4 percent against the euro to 112.35.
The franc appreciated 1.8 percent to 92.81 centimes per dollar, from 94.46 a week earlier. It touched 92.27 centimes yesterday, the strongest level since at least 1971, when Bloomberg records begin. The Swiss currency rose 1.3 percent to 1.2768 per euro, from 1.2935.
The franc and the yen tend to strengthen during periods of financial stress because their export-reliant economies don’t need foreign capital to balance current accounts -- the broadest measure of trade.
The euro rose 0.5 percent to $1.3754, from $1.3693. It reached $1.3838 yesterday, the highest level since Feb. 2.
Libyan Violence
Libya’s leader, Muammar Qaddafi, lost control of much of his country’s oil-rich east amid a wave of violence. Protests have erupted in North Africa and the Mideast since last month’s ousting of Tunisian President Zine El Abidine Ben Ali and the Feb. 11 fall of Egyptian President Hosni Mubarak.
Crude oil for April delivery in New York climbed 14 percent this week, the most in two years, to $97.88 a barrel on concern supplies would be disrupted. It reached $103.41 on Feb. 24, the most since September 2008, before trimming its advance after Saudi Arabia, the U.S. and the International Energy Agency said they can compensate for a supply disruption.
The yen also gained versus the greenback as investors sought safety in U.S. Treasuries, pushing yields down and making dollar-denominated assets less attractive. Benchmark U.S. 10- year note yields fell 17 basis points to 3.41 percent, the biggest weekly loss since May. A basis point is 0.01 percent.
Dollar Index
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners including the yen and euro, fell 0.5 percent for the week, its second straight five-day decline.
The greenback extended losses against its Australian counterpart yesterday as the U.S. economy expanded in the fourth quarter more slowly than first estimated. Gross domestic product grew at a 2.8 percent annual pace, Commerce Department data showed, compared with an earlier estimate of 3.2 percent.
The U.S. unemployment rate increased to 9.1 percent in February from 9 percent the previous month, economists in a Bloomberg survey forecast before the Labor Department reports the data on March 4.
“Anything that is going to indicate that it is going to take longer for a self-sustained U.S. recovery is going to prolong rate hikes and is going to demean the dollar,” said Jessica Hoversen, a Chicago-based analyst at the futures broker MF Global Holdings Ltd.
Rate Bets
The euro gained against the dollar as traders added to bets for higher borrowing costs in Europe amid the surge in crude. The implied yield on the three-month Euribor futures contract for December reached 1.97 percent on Feb. 23, from 1.88 percent a week earlier.
“Inflation indeed has been rising, and that is very much the effect of increasing energy prices that drive upwards these figures,” Amadeu Altafaj, a spokesman for the European Commission, told reporters in Brussels on Feb. 24.
The ECB has held its key rate at 1 percent since May 2009. The Fed has kept its benchmark at zero to 0.25 percent since December 2008, and policy makers reiterated last month it will stay low for an “extended period.”
Futures on the CME Group Inc. exchange yesterday showed a 35 percent probability the Fed will boost its rate in December, versus a 41 percent chance a week earlier.
ECB Outlook
ECB President Jean-Claude Trichet told reporters on Feb. 23 that policy makers will take the decisions necessary to maintain price stability in the euro region. All 52 economists in a Bloomberg News survey forecast the ECB will keep its rate unchanged this week.
“The euro is at relatively high levels, and there needs to be some sort of new stimuli for it to break decisively clear of its recent highs,” said Nick Bennenbroek, head of currency strategy at Wells Fargo & Co. in New York. “The market will be watching the ECB and Mr. Trichet, and we’ll see if the euro survives expectations.”
New Zealand’s dollar, nicknamed the kiwi, was the worst performer versus the greenback this week as investors speculated a 6.3 magnitude earthquake that struck Christchurch would hurt the country’s economy.
The kiwi fell 1.3 percent to 75.16 U.S. cents. It rose yesterday, paring the loss, as Standard & Poor’s said the quake would have no immediate effect on the nation’s credit rating.
To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
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