Australia’s dollar fell below 90 U.S. cents for the first time since March, and Sweden’s krona declined after elections as prospects for U.S. interest-rate increases next year boosted the greenback’s allure.
The Bloomberg Dollar Spot Index rose to a 14-month high. Australia’s currency (CME:A6Z14) extended this month’s drop to 3.4% after data showed the weakest growth in Chinese industrial output since the global financial crisis. Emerging-market currencies slid. The krona (CME:SKZ14) declined as Sweden faced the prospect of a hung parliament.
“The risks now are building for the Australian dollar, not just from the U.S. higher yields but from the Chinese angle as well,” said Ian Stannard, head of European foreign-exchange strategy at Morgan Stanley in London. “We’ve seen the Aussie already moving below 90, giving quite a bearish signal. It’s an important week for global risk-assessment.”
Australia’s currency fell 0.2% to 90.23 U.S. cents at 8:36 a.m. New York time and earlier touched 89.84 cents, the lowest level since March 12. The krona depreciated 0.4% to 7.1464 versus the U.S. currency and reached 7.1571, the weakest since June 2012.
The U.S. dollar (NYBOT:DXZ14) strengthened 0.4% to $1.2916 per euro (CME:E6Z13) and was little changed at 107.24 yen. The euro fell 0.5% to 138.51 yen. Japanese financial markets were shut today for a national holiday.
Chinese industrial output rose 6.9% from a year earlier in August, the statistics bureau said Sept. 13. That was down from 9% in July and the slowest pace outside the Lunar New Year holiday period of January and February since December 2008, based on previously reported data compiled by Bloomberg. China is Australia’s largest trading partner.
Before the slide in the Aussie, the median forecast in Bloomberg surveys of analysts for the currency’s end-2014 level had climbed to 92 cents at the beginning of this month. That was the highest projection since July 2013 and the first time in more than a year that the Aussie’s spot level had fallen below the survey estimate.
The krona depreciated as the three-party Social Democratic opposition led by Stefan Loefven won 43.7% of the votes, versus 39.3% for the government of Prime Minister Fredrik Reinfeldt, with all the votes counted. The nation’s political establishment was thrown into turmoil as backing for the anti- immigration Sweden Democrats more than doubled, to 12.9%, making them the third-largest party.
The result marks an end to eight years of rule by Reinfeldt’s conservative-led coalition. The premier said he will hand in his resignation today as the responsibility of forming a new government falls to the Social Democrats, which won the most votes.
“The krona has weakened in response to the Swedish election result,” BNP Paribas SA analysts led by London-based Steven Saywell, wrote in an e-mailed note. “The market’s concern is over the time it may take for a government to be formed, but we would highlight that the current weak levels of the krona limit the scope for a selloff.”
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major currencies, increased 0.1% to 1,051.55 and had touched 1,052.14, the highest since July 2013.
A gauge of manufacturing in the New York region rose more than forecast, climbing to a reading of 27.54 for September, from 14.69. A Bloomberg forecast called for 15.95.
The dollar has risen 3.6% over the past month, making it the best performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted indexes. Signs of a strengthening U.S. economy have boosted speculation the Federal Reserve is moving closer to raising interest rates as it tapers its program of quantitative easing.
There’s a 78% chance the Fed will raise its target for overnight lending between banks from a range of zero to 0.25% by its September 2015 meeting, fed funds future data compiled by Bloomberg show today. Policy makers begin a two-day gathering tomorrow.
“The strength of the dollar is something we’ve been anticipating, knowing that we have QE finally ending,” Dan Morris, a global investment strategist at TIAA-CREF Asset Management, said in an interview on Bloomberg Television’s “On The Move” with Jonathan Ferro in London. “You do see a negative reaction on the part of emerging markets when those currencies do start to weaken against the dollar, with cash flowing back to the U.S.”
A Bloomberg index of 20 developing-nation currencies slid 0.3% to 88.97 and touched 88.90, its lowest level since 2009.
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