The dollar and yen rose against most major counterparts as concern trade friction between the US and China will escalate and Europe’s debt crisis will dent growth supported demand for the safest assets.
The greenback advanced after the US Senate passed legislation punishing China for its undervalued currency. The euro declined before a report on industrial production that may indicate a slowdown in Europe. The pound maintained Tuesday’s loss versus the dollar before data forecast to show UK unemployment claims increased for a seventh month. Indonesia’s rupiah declined for a fourth day after yesterday’s unexpected interest-rate cut by the nation’s central bank.
“Relations between the US and China may worsen, leading to a trade war that could slow down the global economy,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp, a currency margin company. “The bias is definitely for risk aversion and for buying the dollar and the yen.”
The dollar rose 0.2 percent to $1.3612 per euro at 12:52 p.m. Tokyo time. The yen added 0.1 percent to 104.41 versus the 17-nation euro. The greenback bought 76.70 yen from 76.65.
The MSCI Asia Pacific Index of shares fell as much as 1.3 percent before trading little changed on the day.
US lawmakers voted 63-35 on Tuesday to approve a measure that would let companies seek duties to compensate for a weak Chinese yuan. Governments that undervalue their currencies and don’t take corrective action would face penalties, including increased dumping duties, a ban on federal procurement in the US and ineligibility to receive financing form the Overseas Private Investment Corporation.
China called on the US government and Congress to oppose the use of legislation to push for changes in yuan exchange-rate policies, according to a statement from the Chinese Ministry of Foreign Affairs on its website on Wednesday.
The euro slid versus its US counterpart amid signs the region’s sovereign debt crisis is weighing on growth. Slovakia’s parliament yesterday failed to approve changes to Europe’s bailout fund, making the country the only member of the euro area that hasn’t ratified the retooled plan.
Industrial production in the euro area probably fell 0.8 percent in August after increasing a revised 1.1 percent in July, according to the median estimate of economists in a Bloomberg News survey before Wednesday’s report.
“We’ve long maintained a bearish outlook for euro,” said said Robert Rennie, chief currency strategist in Sydney at Westpac Banking Corp., Australia’s second-largest lender. “Europe is clearly heading towards a recession. At the heart of this is a liquidity, solvency, and therefore, economic issue that needs to be resolved, and it needs to be resolved quickly.”
The euro has lost 3.2 percent in the past six months, the third-worst performer among the 10 developed-nation peers tracked by Bloomberg Correlation Weighted Currency Indexes.
Italy will sell as much as €6.5bn ($8.9bn) of bonds due in 2016, 2018, 2021 and 2025 tomorrow. That sale comes before the country pays back €15.5bn of floating-rate bonds due Nov 1, Italy’s final bond redemption in 2011. The nation sold €9.5bn of Treasury bills on Tuesday, the maximum set for the auction.
The pound held yesterday’s 0.6 percent drop versus the dollar amid concern economic recovery in the UK is faltering.
Jobless benefit claims rose by 24,000 last month after gaining 20,300 in August, the Office for National Statistics is forecast to say today according to a Bloomberg survey of economists.
Recent economic data out of the UK will provide “further justification” for the Bank of England to expand its asset purchasing program, according to BNP Paribas SA. “We do think that the easing in monetary conditions currently underway will eventually steer GBP lower,” strategists including Ray Attrill wrote in a report on Tuesday.
The pound lost 0.1 percent to $1.5567. The currency has declined versus 15 of its 16 most-traded peers this month.
The Indonesia rupiah headed for its longest losing streak in almost a month against the dollar as Bank Indonesia lowered its reference rate yesterday by 25 basis points to 6.50 percent
The decision came after the central bank held its key rate steady for seven months. All 15 analysts in a Bloomberg survey had predicted that the rate would stay unchanged.
“The rupiah is declining because of the rate cut,” said Bambang Eko Joewono, the Jakarta-based head of the global- markets division at PT Bank UOB Indonesia.
The rupiah dropped 0.4 percent to 8,945 per dollar, according to prices from local banks complied by Bloomberg.
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