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Franc Drops as Mideast, Libya Turmoil Eases; N.Z., Australia Dollars Gain
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The Swiss franc fell against most of its major counterparts as concern eased
that the political turmoil in Libya will disrupt global oil markets, denting the
refuge appeal of the currency.
The yen gained against the dollar for an eighth day, the longest winning streak
this year, after data showed the U.S. economy grew more slowly than first
estimated in the fourth quarter. The franc retreated from a record high versus
the greenback as oil slid below $100 a barrel after Saudi Arabia, the U.S. and
the International Energy Agency said yesterday they can compensate for
interrupted supply. Stocks rose.
“Trades that were put in for the Swissie and the yen are being unwound as fear
over the oil supply dissipates,” said Greg Salvaggio, senior vice president of
capital markets at currency-trading firm Tempus Consulting Inc. in Washington.
The franc depreciated 0.2 percent to 92.81 centimes per dollar at 5 p.m. in New
York after earlier reaching 92.27 centimes, the strongest level since at least
1971, when Bloomberg records begin. The Swiss currency rose 0.1 percent to
1.2768 per euro. The dollar gained 0.3 percent versus the euro to $1.3754,
paring a weekly loss to 0.4 percent.
The yen rose 0.3 percent to 81.68 per dollar and advanced 0.6 percent to 112.35
per euro. The Japanese currency fell 0.6 percent to 83.12 yen per Australian
dollar.
The franc and the yen tend to strengthen during periods of financial stress
because their export-reliant economies don’t need foreign capital to balance
current accounts -- the broadest measure of trade.
Higher-Yielding Assets
The Australian, New Zealand and Canadian dollars gained against most major
currencies as investors sought higher- yielding assets such as equities. The
Standard & Poor’s 500 Index advanced 1.1 percent in its first gain in a week.
Crude oil futures traded at $98.22 a barrel in New York after touching $99.20.
They topped $103 yesterday, the highest in 29 months.
Canada’s currency reached the strongest level since March 2008, 97.73 cents per
U.S. dollar. Australia, New Zealand and Canada derive the majority of their
exports from commodities.
The Aussie, as Australia’s currency is known, appreciated 0.9 percent to
$1.0177. It gained for a second week against the U.S. dollar, rising 0.3
percent.
New Zealand’s dollar, nicknamed the kiwi, also strengthened today after Standard
& Poor’s said the earthquake in Christchurch would have no immediate effect on
the nation’s credit rating. It rose 0.6 percent to 75.15 U.S. cents. The kiwi
lost 1.3 percent on the week amid concern the quake would hurt the nation’s
economy.
‘Long Australia’
“After the sustained strength in the Aussie this week, it seems like the only
trade that makes sense is long Australia,” said Tempus’s Salvaggio. A long
position is a bet a currency will appreciate.
The New Zealand currency was the biggest loser over the past month in a basket
of 10 developed-nation currencies in the Bloomberg Correlation-Weighted Currency
Indexes. It dropped 3.7 percent, while the euro declined 0.6 percent, the yen
slipped 0.5 percent and the dollar lost 1.2 percent.
U.S. gross domestic product expanded in the fourth quarter at a 2.8 percent
annual pace, compared with an earlier estimate of 3.2 percent, Commerce
Department figures showed today in Washington. The forecast in a Bloomberg News
survey of 77 economists was for a 3.3 percent increase.
“Anything that is going to indicate that it is going to take longer for a
self-sustained U.S. recovery is going to prolong rate hikes and is going to
demean the dollar,” said Jessica Hoversen, a Chicago-based analyst at the
futures broker MF Global Holdings Ltd.
Safety Demand
The franc and yen advanced this week as violence in Libya spurred demand for
safer assets. Leader Muammar Qaddafi, who has lost control of much of his North
African country’s oil-rich east, tried to tighten his grip today on the capital,
Tripoli. Libya holds Africa’s largest crude oil reserves.
The yen rose 1.8 percent this week against the dollar, the biggest gain this
year, and the franc strengthened 1.7 percent. Year-to-date, the Japanese
currency has depreciated 0.8 percent, while the Swiss has gained 0.7 percent.
Saudi Arabia has increased crude oil production this month in response
developments in Libya, the International Energy Agency said today. The
Paris-based IEA said yesterday it’s ready to release emergency stockpiles, if
needed.
Not a Risk
“The oil price increases we’ve seen so far don’t pose a risk to the recovery,”
Federal Reserve Bank of Richmond President Jeffrey Lacker told reporters today
at a monetary policy conference in New York.
The pound rose 0.2 percent to 85.33 pence per euro, after falling for the past
five days. Earlier it lost as much as 0.5 percent to 85.93 pence, the weakest
level since Jan. 31, after data showed the British economy shrank more than
initially estimated. Sterling slipped 0.2 percent to $1.6113.
U.K. gross domestic product contracted 0.6 percent in the fourth quarter, the
Office for National Statistics said today, exceeding the Jan. 25 estimate of a
0.5 percent drop.
