Bloomberg 07 Ottobre 2009

The dollar fell the most in two weeks against the euro after the Independent newspaper said Arab states may switch to a basket of assets including the euro, yen and gold for oil trading.

The dollar declined against 15 of its 16 most-traded counterparts as Asian stocks rallied and the Independent reported Persian Gulf states along with Japan and China are discussing dropping the greenback for oil trades, citing unnamed sources. The yen rose after Japan’s finance minister said he told Group of Seven leaders that weak-currency policies were undesirable. Australia’s dollar surged after the nation’s central bank unexpectedly raised benchmark interest rates.

“Eventually there will be a move to non-dollar commodity contracts, and it may be the next big risk for the dollar,” said Ben Simpfendorfer, chief China economist for Royal Bank of Scotland Group Plc in Hong Kong. “At the same time, I don’t want to overplay the importance of the story. There’s no credible sources there.”

The dollar dropped 0.6 percent to $1.4738 per euro at 7:28 a.m. in London, the biggest decline since Sept. 22, from $1.4648 in New York yesterday. The U.S. currency also fell 0.6 percent to 89.01 yen, the most since Sept. 25, from 89.53 yen. The 16- nation euro was little changed at 131.06 yen.

Oil-producing nations are seeking to move to a basket of assets, including the yen, yuan, euro and gold to settle transactions, the U.K.-based Independent said, citing Middle Eastern and Chinese banking officials it didn’t name.

‘Undermining the Dollar’

Meetings to discuss the transition have already been held by finance ministers and central bank governors from Russia, China, Japan and Brazil, the newspaper reported.

“The very fact that such an idea is being entertained is undermining the dollar,” said Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd. in Hong Kong.

Denominating in a basket of currencies would be a “recipe for confusion” among the oil-producing Gulf Cooperation Council and its customers, said John Vautrain, senior vice president at oil industry consultants Purvin & Gertz Inc. in Singapore.

“If the GCC did, that would just be very messy,” Vautrain said. “If you do something that makes your buyers unhappy they will reduce your price. And that’s not in anybody’s interest in the GCC.”

The greenback pared losses after Saudi Central Bank Governor Muhammad al-Jasser said his nation hasn’t held talks with other oil producers and consumers on shifting away from the dollar.

Rising Stocks

The euro climbed as Asian stocks rose and before a report forecast to show German factory orders advanced for a sixth month in August. The MSCI Asia Pacific Index of regional shares gained 1.2 percent, weakening demand for safe-haven currencies.

“Evidence suggests the global economy is recovering,” said Greg Gibbs, a Sydney-based currency strategist with Royal Bank of Scotland Group Plc. “Certainly, strong equities enforce that trend.”

The yen gained against the dollar after Japanese Finance Minister Hirohisa Fujii said he told officials from the Group of Seven nations meeting in Istanbul last weekend that governments shouldn’t pursue policies that seek to devalue their currencies.

“I made the point that it’s undesirable for individual nations to take a weak-currency policy,” Fujii said at a news conference in Tokyo today. “Currency devaluation policies back in the 1930s had an adverse impact on the global economy and politics.”

Yen Concerns

Fujii said after taking office last month he didn’t support a weak currency. Last weekend in Istanbul, he said that Japan would “take action” if currencies show excessive moves. The yen has gained 14 percent against the dollar in the past year, hurting earnings for export-dependent Japanese companies.

“The market is interpreting his latest comments as signs the government will let the yen keep rising,” said Yoh Nihei, trading group manager at Tokai Tokyo Securities Co. in Tokyo. “The yen is benefiting from that.”

Sony Corp. Vice Chairman Ryoji Chubachi said the rising yen may undermine the company’s ability to compete against overseas electronics makers as it faces falling television prices and a weak U.S. economy.

“We don’t have a moment to breathe,” Chubachi said in an interview today at the CEATEC trade fair in Chiba, near Tokyo. “It is a tough environment.”

The Australian dollar jumped 1.1 percent to 88.71 U.S. cents after the country’s central bank became the first among the Group of 20 nation’s to raise benchmark interest rates since the start of the financial crisis.

German Factory Orders

Reserve Bank Governor Glenn Stevens increased the overnight cash rate target to 3.25 percent from 3 percent in Sydney today. Only one of 20 economists surveyed by Bloomberg News forecast today’s decision. The rest predicted no change.

The euro gained before a report forecast to show German factory orders increased for a sixth month. The Economy Ministry in Berlin is forecast to report Germany’s factory orders advanced 1.1 percent in August following a 3.5 increase in July, according to the median estimate of economists in a Bloomberg News survey. The data is due tomorrow.

“Solid economic data in Germany are good for the euro- zone’s economy, boosting demand for the euro,” said Toshiya Yamauchi, a Tokyo-based manager of the foreign-exchange margin trading department at Ueda Harlow Ltd. “Rising stocks are also encouraging risk taking, and the yen and dollar are under pressure.”

By Yoshiaki Nohara and Ron Harui

Source >  Bloomberg | oct 06