The dollar fell against 13 of its 16 major counterparts after pending U.S. home resales unexpectedly rose, signaling the housing market may start to stabilize and boosting investor appetite for higher-yielding assets The euro was near its strongest level in two weeks versus the dollar after European Central Bank President Jean-Claude Trichet said a double-dip recession is “not in the cards.” Speaking after the ECB left its benchmark rate at 1 percent, he said risks to the inflation outlook are “on the upside.” Equities rose.
“The U.S. data has stopped disappointing after a long period where we had consistent negative surprises,” said Jens Nordvig, a managing director of currency research in New York at Nomura Holdings Inc. “That is putting the dollar a little bit on the back foot, especially against the riskier crosses.”
The dollar fell 0.2 percent to 84.31 yen at 4:57 p.m. in New York, from 84.44 yesterday. It touched 83.60 yen on Aug. 24, a 15-year low. The euro rose 0.1 percent to $1.2827, compared with $1.2809 yesterday, when it rose to $1.2856, the strongest level since Aug. 19. The shared currency was little changed at 108.13 yen, compared with 108.15 yen.
The Standard & Poor’s 500 Index advanced 0.9 percent after rallying 3 percent yesterday.
Top Performers
Brazil’s real and Norway’s krone were among the top performers against major currencies, rising 1.1 percent and 0.7 percent versus the dollar. Both countries traditionally benefit from global economic expansion.
Gains were tempered before a report tomorrow that may show growth in U.S. private payrolls slowed last month. Employers other than government agencies added 40,000 positions, compared with 71,000 in July, according to a Bloomberg survey before the Labor Department releases the data. The economy lost 105,000 jobs overall, economists forecast.
“The market, as far as risk is concerned, is winding down as people wait for tomorrow’s non-farm payrolls like those on the East Coast wait for Hurricane Earl,” said Carl Forcheski, a director on the corporate currency sales desk at Societe Generale SA in New York. “The market is battening down the hatches.”
Sterling and Canada’s dollar were the worst performers today. The Canadian currency fell 0.3 percent to C$1.0534 per greenback after rallying yesterday the most in three months. The pound weakened 0.4 percent to $1.5401 after a report showed the average U.K. house price dropped 0.9 percent in August, the most in six months.
Unexpected Increase
The National Association of Realtors’ index of pending home resales rose 5.2 percent in July after a revised 2.8 percent drop the prior month, data showed today in Washington. A decline of 1 percent was forecast in a Bloomberg News survey.
The euro area’s economy will probably expand between 1.4 percent and 1.8 percent this year, the ECB said. That’s up from a previous forecast range between 0.7 percent and 1.3 percent. Trichet extended emergency lending measures for banks into 2011.
Europe’s common currency has fallen 9.3 percent this year against nine other developed-world currencies, the biggest loss in the so-called Group of 10, Bloomberg Correlation-Weighted Currency Indexes show. It was hurt by investor concern that countries from Greece to Spain would struggle to repay debts.
The Swiss franc neared parity with the dollar for the first time since December after the State Secretariat for Economic Affairs in Bern said gross domestic product rose 0.9 percent from the first quarter. Economists in a Bloomberg survey forecast a 0.8 percent gain.
The franc gained as much as 0.6 percent to 1.0096 per dollar before trading at 1.0130. It touched the strongest ever against the euro, 1.2852, on Aug. 31 and traded today at 1.2991.
Growth, Haven Status
The franc will stay strong and investors should hold it as a proxy for the former German mark, as the currency benefits from economic growth and its status as a haven, UBS AG said.
The yen has gained the most among G-10 currencies this year, rising 14 percent, according to the Correlation-Weighted Currency Indices. The surge has prompted Japanese officials to consider measures to curb the gain, which is hampering exports.
Japan views probable U.S. opposition to intervention in the foreign-exchange market to address the yen’s appreciation as an obstacle to taking unilateral action, according to three Japanese government officials. Central banks intervene by buying or selling currencies to influence exchange rates.
Yen sales without U.S. backing would be a challenge, the officials said on condition of anonymity because government discussions are private. Developing economies abroad are weaker than when Japan last intervened in 2004 and are themselves looking to boost exports.
Two of the officials also said volatility, rather than the current level, would be a more likely trigger for yen sales.
Costa Rican Colon
Costa Rica’s central bank plans to buy as much as $50 million a month in the currency market in what analysts say is a bid to stem a rally that’s sent the colon to a two-year high.
The colon has surged 7 percent in the past three months and touched 504.75 per dollar on Aug. 31. The colon weakened 0.4 percent to 508.27 today, its biggest slide in six weeks, after the bank said in a statement it will buy up to $600 million in the market by December 2011.