U.S. stocks rebounded from yesterday’s drop and the Dollar Index rose to the highest level since July 2010 as better-than-estimated economic data fueled speculation the Federal Reserve will consider scaling back stimulus. Gold extended its longest slump in four years.
The dollar fell against 14 of its 16 most-traded peers before the Federal Reserve opens a two-day meeting tomorrow amid bets it will maintain bond purchases under quantitative easing for the foreseeable future.
Intervention by the Bank of Japan today may not change market fundamentals enough to weaken the yen, according to Derek Halpenny, European head of currency research at Bank of Tokyo-Mitsubishi UFJ Ltd. in London.
The yen rallied from near its weakest level in almost seven months against the dollar after Bank of Japan Governor Masaaki Shirakawa said the opposition party’s proposals to weaken the currency are unrealistic.
The dollar will rise to a level against the euro last reached in September as U.S. economic growth picks up and expectations for central bank rate increases elsewhere wane, according to Bank of Tokyo-Mitsubishi UFJ Ltd.
The world’s most accurate foreign- exchange forecasters say the dollar will be the best currency to own this year as the Federal Reserve’s bond purchases bolster the U.S. economy instead of debasing America’s legal tender.
The yen depreciated to its weakest level in 2 1/2 years against the dollar and euro amid speculation Prime Minister Shinzo Abe will select a new Bank of Japan governor who will boost monetary stimulus.
The dollar fell against all of its 16 most-traded peers as speculation the Federal Reserve and the Chinese government will take further steps to encourage economic growth damped demand for safer assets.