Dollar Drops on Fed Outlook; Yen Surges After Abe Election Win

The dollar fell against most major peers as traders tempered expectations of an imminent reduction in Federal Reserve monetary stimulus. The yen surged after Japan’s ruling party won in elections to the upper house.

The U.S. currency extended back-to-back weekly declines against the euro as Pacific Investment Management Co.’s Bill Gross said he expects the Fed won’t tighten policy until 2016 at the earliest. Chairman Ben S. Bernanke last week said it’s “too early” to decide on timing for tapering bond purchases. The yen rose against its 16 major counterparts after Prime Minister Shinzo Abe’s party solidified control of Japan’s parliament, raising concern about whether he will focus on structural reform or on strengthening defense and revamping the constitution.

“The market is already positioned for dollar strength, so any disappointing economic data from the U.S. or dovish comments from policy makers can send the dollar south,” said Yunosuke Ikeda, the head of foreign-exchange strategy at Nomura Securities Co. in Tokyo. “The latest data is showing a little bit of a slowdown, giving a good reason to reduce dollar-bullish speculative positions.”

The dollar weakened 0.8 percent to 99.82 yen as of 9:14 a.m. in Tokyo after earlier falling as much as 1 percent. It declined 0.2 percent to $1.3167 per euro following a 0.6 percent weekly drop to $1.3143 on July 19. The euro slid 0.6 percent to 131.44 yen.

(Source: Bloomberg)

Bets G-20 Will Yen Holds Losses on Endorse BOJ Stimulus

The yen held losses against most major peers on bets Group of 20 finance ministers and central bankers meeting this week will endorse the Bank of Japan’s monetary easing that aims to stoke 2 percent inflation.

Russian Deputy Finance Minister Sergei Storchak said the G-20 probably won’t call for a tapering of stimulus in nations including Japan. The euro traded near a six-week high versus the yen after Greek lawmakers approved austerity measures that clear the way for the next batch of bailout loans. Demand for the dollar was limited after Federal Reserve Chairman Ben S. Bernanke signaled the central bank’s asset purchases, which tend to debase the currency, hinge on economic performance.

The yen was little changed at 99.66 per dollar as of 10:20 a.m. in Tokyo from yesterday, when it lost 0.5 percent. It was little changed at 130.69 per euro from yesterday, when it touched 131.36, the weakest since June 5. The 17-nation euro bought $1.3112 from $1.3125.

(Source: Bloomberg)

Hedge Funds Bought Gold in Biggest Rally Since 2011

Hedge funds raised bets on higher gold prices for a second week as comments from Federal Reserve Chairman Ben S. Bernanke damped expectations for an imminent tapering of stimulus. Futures rose the most since 2011.

Speculators increased their net-long position by 4.1 percent to 35,691 futures and options, U.S. Commodity Futures Trading Commission data for July 9 show. Net holdings expanded even as speculators increased short bets to a record. Net-bullish wagers across 18 U.S.-traded commodities retreated 3.4 percent as investors became the most bearish ever on corn. They were more bullish on silver and palladium.

The U.S. needs “highly accommodative monetary policy for the foreseeable future,” Bernanke said July 10. Minutes from the Fed’s June policy meeting showed many officials wanted a stronger labor market before tapering bond purchases. Gold more than doubled from 2008 to a record $1,923.70 an ounce in September 2011 as the Fed cut interest rates to a record low and bought debt. Prices plunged into a bear market in April as some investors lost faith in the metal as a store of value.

(Source: Bloomberg)