Yen, Dollar Advance on Haven Demand as Prospects Fade for U.S. Debt Accord
The yen and dollar rallied versus their major counterparts on bets U.S. lawmakers will announce that a congressional committee failed to agree on deficit cuts, boosting demand for haven assets.
The euro dropped against the yen following last week’s biggest loss since September as Spain’s Socialists became the fifth European government to be ejected because of the region’s debt crisis. The pound fell for the first time in three days against the dollar as home sellers cut asking prices. Australia’s dollar decreased to the lowest in five weeks on reduced demand for higher-yielding assets.
Dollar Index
IntercontinentalExchange Inc.’s Dollar Index, used to track the currencies of six major U.S. trading partners, increased 0.4 percent to 78.335 on demand for a refuge.
Foreign bank deposits at the Federal Reserve have more than doubled to $715 billion from $350 billion since the end of 2010 amid Europe’s debt turmoil, buttressing the dollar’s status as the world’s reserve currency.
Forty-seven non-U.S. banks held balances of more than $1 billion at the New York Fed as of Sept. 30, up from 22 at the end of 2010, according to a survey of 80 financial institutions by ICAP Plc, the world’s largest inter-dealer broker. The dollar has appreciated 7.2 percent since Standard & Poor’s cut the nation’s AAA credit rating Aug. 5, the second-best performance after the yen among developed-nation peers, according to Bloomberg Correlation-Weighted Currency Indexes.
Crude Oil Declines to One-Week Low on U.S. Budget Concerns, European Debt
Oil dropped for a third day in New York on signs that U.S. lawmakers will fail to agree on cutting the budget deficit and on concern that Europe’s debt crisis will send the region’s economy into a recession.
Futures fell as much as 2.1 percent on speculation that a debt-reduction committee will fail, setting the stage for $1.2 trillion in automatic cuts. Growth in Germany, Europe’s largest economy, may slow next year, the Bundesbank said today. Saudi Arabian Oil Co. Chief Executive Officer Khalid Al-Falih said the world economy is at risk of a double-dip recession.
“It looks like the congressional committee won’t meet the deadline to reach an agreement, so automatic cuts will kick in,” said Tom Bentz, a broker with BNP Paribas Commodity Futures Inc. in New York. “The European debt crisis continues to put pressure on equities and commodities.”
Crude oil for January delivery fell 98 cents, or 1 percent, to $96.69 a barrel at 9:13 a.m. on the New York Mercantile Exchange. Futures are up 5.8 percent this year.
Brent oil for January settlement dropped 46 cents, or 0.4 percent, to $107.10 a barrel on the London-based ICE Futures Europe exchange.
