The dollar strengthened against most of its 16 major counterparts as escalating tension in Syria exacerbated declines in developing-nation currencies.
India’s rupee and Turkey’s lira both dropped to records as stocks around the world slumped. The yen fell for the first time this week against the dollar on speculation diverging monetary policy in Japan and the U.S. will spur weakness in the Asian nation’s currency. The pound slid to a three-week low versus the euro before a speech by Bank of England Governor Mark Carney today.
“Selloffs in emerging-market currencies are spurring buying of the greenback, lifting dollar-yen as well,” said Hiroshi Yoshida, a senior portfolio manager in Tokyo at MassMutual Life Insurance Co. “Because many investors expect higher dollar-yen in the medium to long term, they want to buy the pair when it falls to good levels.”
The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 major peers, advanced 0.3 percent to 1,027.54 as of 8:49 a.m. London time. The U.S. currency gained 0.6 percent to 97.56 yen and strengthened 0.1 percent to $1.3380 per euro. The yen fell 0.5 percent to 130.53 per euro.
President Barack Obama’s administration is working with allies including the U.K. and France to reach agreement on limited military action against Syria after concluding that the nation’s regime, led by Bashar al-Assad, used chemical weapons against civilians.
Any armed response would be narrowly focused on Syria’s weapons capabilities and wouldn’t be aimed at deposing the Syrian government, U.S. and U.K. officials said.
Shares Slide
The MSCI Asia Pacific Index of regional stocks fell 1.6 percent. In the U.S., the Standard & Poor’s 500 Index (SPX) dropped 1.6 percent yesterday. The Stoxx Europe 600 Index fell for a third day, slipping 0.2 percent.
Turkey’s lira weakened 0.8 percent to 2.0517 per dollar after touching 2.0693, a record low according to data compiled by Bloomberg since 1981. India’s rupee fell as much as 3.7 percent to an all-time low of 68.755 against the U.S. currency.
JPMorgan Chase & Co.’s Global FX Volatility Index climbed 1.5 percent to 10.48, the highest since July 16.
Pending sales of previously owned U.S. homes stagnated in July, according to the median estimate of economists surveyed by Bloomberg News before today’s report. Data on mortgage applications is also due, after the gauge fell to the lowest in more than two years in the week to Aug. 16.
U.S. GDP
Revised figures from the Commerce Department tomorrow will show U.S. gross domestic product grew at a 2.2 percent annualized rate in the second quarter, a separate survey showed, faster than the initial reading of 1.7 percent.
Central-bank policy makers are debating whether the U.S. economy is strong enough to allow them to pare back monthly purchases of $85 billion in Treasuries and mortgage debt. The Federal Reserve will reduce the amount at its next meeting on Sept. 17-18, according to 65 percent of economists in an Aug. 9-13 Bloomberg survey.
The Bank of Japan is buying about 7 trillion yen a month of government bonds to end 15 years of deflation.
“For the dollar to decline further, it would need a substantial change in the Fed’s policy outlook, like the complete disappearance of a chance for the Fed’s tapering,” Daisuke Karakama, a market economist at Mizuho Bank Ltd., wrote in a research note today. “But, such a possibility seems to be quite low for now.”
Carney’s Speech
Bank of England Governor Carney gives his first policy speech since taking over on July 1. He introduced forward guidance this month to prevent a pickup in borrowing costs from undermining the economic recovery.
The central bank’s Monetary Policy Committee meets on Sept. 5, the same day as the European Central Bank.
“Given the arguably disappointing market reaction to the Bank of England’s new forward guidance, we expect the tone to be quite dovish,” Vicky Redwood, an economist at Capital Economics Ltd. in London, wrote in a research note today. “He may even go so far as to hint that the MPC will do more to stem the rise in rate expectations.”
The pound fell 0.1 percent to 86.20 pence per euro, after reaching 86.29 pence, the weakest since Aug. 7.
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