The dollar rose against most of its major counterparts as turmoil in Egypt and concern that Europe’s debt crisis may worsen fueled investor appetite for safety of US assets.
The greenback gained for a third week against the euro amid speculation Portugal’s funding costs are becoming unsustainable and as Egyptian President Hosni Mubarak stepped down and handed power to the military. Job data in the US helped boost appetite for the currency. US retail sales increased for a seventh month in January, a report next week may show.
“The dollar’s rally was built on safe-haven flows amid unrest in Egypt and renewed concern about Europe’s sovereign debt crisis,” said Joe Manimbo, a market analyst in Washington at Travelex Global Business Payments, a currency-exchange network. “The other factor that really supported the dollar was positive US data.”
The dollar appreciated 0.2 percent to $1.3554 per euro in New York, from $1.3581 on February 4. It touched $1.3497, the strongest level since January 21. The US currency advanced 1.5 percent, the most in five weeks, to ¥83.43, from ¥82.18. The euro rose 1.3 percent to ¥113.06, from ¥111.62.
Mubarak bowed to the demands of protesters who occupied central Cairo for 18 days demanding an end to his 30-year rule.
The protests, inspired by the revolt that ousted Tunisian President Zine El Abidine Ben Ali on January 14, sparked concern that tension would spread in a region that holds more than 50 percent of the world’s known oil reserves.
Speculation increased that Portugal will have to follow Ireland in tapping the European Financial Stability Facility if yields on its 10-year bonds remain above 7 percent, helping drive the euro to the three-week low against the greenback.
Yields on 10-year Portuguese debt climbed on February 10 to 7.64 percent, the highest level since the introduction of the euro in 1999. They traded on Saturday at 7.31 percent.
“All of the usual things are overhanging the euro from a sovereign-risk standpoint—it’s not as if anything has moved in a euro-positive direction,” said Alan Ruskin, New York-based global head of Group-of-10 foreign-exchange strategy at Deutsche Bank AG.
The 17-nation currency also fell after a German government spokesman said Bundesbank President Axel Weber will leave office on April 30. A successor will be named over the next week, the spokesman said.
The move took Weber, 53, out of the race to succeed Jean-Claude Trichet as president of the European Central Bank (ECB) when Trichet’s term expires on October 31. The ECB has held interest rates at 1 percent since May 2009 to support economic growth.
“It injects some uncertainty into the market,” said Robert Lynch, head of currency strategy for HSBC Holdings Plc. In New York. Weber “is a known entity, and he’s considered hawkish.”
Intercontinental Exchange Inc.’s Dollar Index, which tracks the greenback against the currencies of six major US trading partners, increased 0.5 percent to 78.440 in its first weekly rally since January 7. It touched 78.697, the highest level since January 21.
“The reason we’re seeing a decent-sized move like this is because the outlook in the US is better,” said Jens Nordvig, a managing director of currency research in New York at Nomura Holdings Inc.
The dollar rose on February 10 for the first time in four days versus the euro after US initial claims for jobless benefits fell last week to the lowest level since July 2008. They dropped by 36,000, more than forecast, to 383,000, labor department figures showed.
The Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose to 75.1, the highest level since June. US retail sales increased 0.5 percent in January, according to the median forecast in a Bloomberg News survey before the Commerce Department reports the data on February 15. Orders and sales at factories in the New York region climbed last month, economists in a separate survey forecast before a Federal Reserve Bank of New York report is released the same day.
“We’re really pricing in a Fed exit from zero interest rates in the next year,” Nomura’s Nordvig said.
The Fed has kept its benchmark interest rate at zero to 0.25 percent since December 2008. Analysts forecast the central bank will raise rates to 0.5 percent by year-end, according to a Bloomberg News survey.
Canada’s dollar rose versus 13 of its 16 most-traded counterparts as an unexpected trade surplus stoked speculation the Bank of Canada will raise interest rates sooner than its peers. The key rate is 1 percent.
The currency gained 1.5 percent to ¥84.49, from ¥83.24on February 4. The nation had a C$3 billion ($3 billion) trade surplus in December, its first in 10 months, Statistics Canada reported.
Brazil’s real was the No. 1 performer, gaining as Mubarak’s resignation spurred demand for emerging-market assets. It ended the week up 2 percent to ¥50.09.
Australia’s currency slid below parity with its US counterpart yesterday after Reserve Bank Governor Glenn Stevens said policy makers judged it “sensible” to keep interest rates on hold. The Aussie fell 1.2 percent to $1.0021 this week. It touched 99.61 US cents yesterday, the lowest since January 31. --Bloomberg News
