Dollar Climbs to Two Week High on Evidence of U S Recovery - forex trading tax return australia

Dollar Climbs to Two Week High on Evidence of U S Recovery ~ forex trading tax return australia

By Ben Levisohn and Anchalee Worrachate

The dollar rose to its highest level in two weeks against the yen on better-than-expected housing and manufacturing reports before the release of the Federal Reserve’s January minutes.

The euro slid from the highest level this week versus the dollar after a political ally of Germany’s Chancellor Angela Merkel said “not a single euro” should go to Greece. The yen fell against most of its major counterparts including the Brazilian real and South African rand as signs of a U.S. economic recovery spurred demand for higher-yielding assets.

“Because of the U.S. economic improvement, the dollar is in a better fundamental position than the yen,” said Jessica Hoversen, a foreign-exchange and fixed-income analyst at the futures broker MF Global Ltd. in Chicago. “There’s more risk appetite, and traders are focusing on the yen as the carry currency.”

The dollar advanced 0.6 percent to 90.71 yen at 11:33 a.m. in New York, from 90.14 yesterday, after advancing to 91.16, the highest level since Feb. 3. The euro fell 0.5 percent to 123.52 yen, compared with 124.12. Europe’s currency depreciated 1.1 percent to $1.3616, from $1.3770, after climbing to $1.3788, the highest since Feb. 11.

The real increased 1.1 percent to 49.43 yen and the rand appreciated 1.5 percent to 11.95 yen on speculation investors will increase carry trades, in which they buy higher-yielding assets with amounts borrowed in nations with low interest rates. The benchmark of 0.1 percent in Japan has made the yen popular for funding such transactions.


U.S. Production

U.S. industrial production climbed 0.9 percent last month after a 0.7 percent increase in December, figures from the Fed showed. The median forecast of 78 economists in a Bloomberg News survey was for a 0.7 percent gain in January.

Builders broke ground on 591,000 homes at an annual rate last month, up 2.8 percent from a revised 575,000 in December. Starts were projected to increase to a 580,000 pace, according to the median estimate of 77 economists in a Bloomberg survey.

“The housing data was consistent with a stabilization of economy,” said Michael Woolfolk, senior currency strategist in New York at Bank of New York Mellon Corp., the world’s largest custodial bank, with more than $20 trillion in assets under administration. “It’s positive for the economic backdrop and positive for risk appetite.”

The euro declined versus the dollar after the leader of Chancellor Merkel’s Bavarian political allies said Germany must resist supporting Greece with taxpayers’ money because granting aid would invite other nations to seek bailouts.


‘Stable-Currency Party’

“We are the stable-currency party,” Horst Seehofer, who heads the Christian Social Union, one of three parties in Merkel’s coalition, told a rally in the southern city of Passau today. “That’s why we’re helping Greece politically, but not a single euro must go there.”

The euro has fallen 9.9 percent against the dollar from a one-year high of $1.5144 in November on concern sovereign debt problems will hamper the region’s recovery.

The currency should be capped at $1.40 for the next decade, according to Robert Mundell, a Columbia University professor and Nobel laureate in economics for his work on exchange rates.

“They’ve paid for that overly strong euro in the past and they can’t afford it anymore,” Mundell said in a Bloomberg Television interview. “They need to put a ceiling on the euro.”

Australia’s dollar advanced as much as 1.1 percent to 82.19 yen, the highest level since Jan. 26, as traders increased bets that the nation’s Reserve Bank will raise its benchmark rate next month.


Aussie Rate View

Swaps traders raised to 36 percent the chance the Reserve Bank of Australia will boost the 3.75 percent target lending rate on March 2. Policy makers said in minutes of their previous meeting, released yesterday, that further gains in the target rate were likely.

The Bank of Japan will probably refrain from expanding its lending and asset-purchase programs at its two-day meeting ending tomorrow.

Governor Masaaki Shirakawa and his colleagues will keep the loan facility for commercial banks and monthly purchases of government bonds unchanged, 14 of 16 economists surveyed by Bloomberg said. All of the analysts said the bank will maintain the benchmark interest rate where it is.


To contact the reporters on this story: Ben Levisohn in New York at blevisohn@bloomberg.net; Anchalee Worrachate in London at aworrachate@bloomberg.net
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