June 30 -- The dollar gained versus the euro for the first time in four days as a report showed U.S. consumer confidence unexpectedly dropped in June, increasing demand for the safety of the world’s main reserve currency.
South Africa’s rand advanced to the strongest level versus the dollar since August after the nation posted its first trade surplus in more than two years. The Canadian dollar and Norway’s krone declined after crude oil dropped from an eight-month high, reducing the revenue of commodity exporters.
“It’s a classic risk-aversion trade following the dreadful consumer-confidence number,” said Jacob Oubina, a currency strategist at FOREX.com, a unit of the online currency trading firm Gain Capital in Bedminster, New Jersey. “That’s a dramatic surprise. The dent of confidence doesn’t bode well for consumer spending.”
The dollar climbed 0.4 percent to $1.4026 versus the euro at 12:06 p.m. in New York, from $1.4083 yesterday. The euro traded at 135.23 yen, compared with 135.31 yen, after earlier increasing to 135.96, the highest level since June 15. The dollar appreciated 0.4 percent to 96.47 yen from 96.06.
The Conference Board’s sentiment index decreased this month to 49.3 from a revised 54.8 in May, the New York-based research group said today. The median forecast of 70 economists surveyed by Bloomberg News was for a gain to 55.3 from a previously reported 54.9 in the prior month.
The rand appreciated as much as 2 percent to 7.6722 against the dollar, the strongest level since Aug. 29, as South Africa posted a trade surplus of 2 billion rand ($258 million) last month following a deficit of 1.5 billion rand in April. The rand gained 23 percent in the second quarter, the best performance among the 16 most-traded currencies tracked by Bloomberg.
Dollar This Quarter
The dollar and yen were the biggest losers among major currencies in the second quarter as signs that the global recession is abating encouraged investors to sell the two currencies they accumulated during the financial turmoil.
The U.S. currency declined 5.6 percent against the euro in the three months ended today, its first quarterly drop since March 2008, pushing the greenback 0.3 percent lower in 2009. The yen was down 6.3 percent versus the euro this year, compared with a 2.6 percent decline in the first six months of 2008.
“The dollar acted as a safe haven during the crisis, appreciating notably,” Ulrich Leuchtmann, head of foreign- exchange research in Frankfurt at Commerzbank AG, Germany’s second-largest lender, wrote in a client note today. “So it’s to be expected that this situation would change once things returned to normal.”
U.K. Sentiment
The pound earlier rose as much as 1.1 percent to $1.6743, the highest level since Oct. 21, as the market researcher GfK NOP said U.K. consumer confidence increased in June to the highest level in 14 months and Nationwide Building Society said house prices climbed 0.9 percent.
Sterling later dropped 0.7 percent to $1.6454 after the government said Britain’s economy shrank 2.4 percent in the first quarter, more than previously estimated and the biggest contraction since 1958.
The Canadian dollar fell 0.6 percent to C$1.1631 and the Norwegian krone dropped 0.5 percent to 6.4388 per dollar after crude oil for August delivery fell 3.2 percent to $69.24 a barrel. Norway is the world’s fifth-largest crude-oil supplier, while raw materials such as crude oil and gold account for half of Canada’s exports.
Three other commodity currencies, the Brazilian real and the Australian and New Zealand dollars, were among the best performers this quarter, rising at least 15 percent.
The currencies’ gains may slow in the second half on waning risk appetite, according to Royal Bank of Scotland Group Plc.
Outlook for Aussie
“We remain skeptical that the Australian dollar and commodity currencies have all that much further to run,” Greg Gibbs, a strategist in Sydney at RBS, wrote today in a report. “As we head into the second half of the year, global data disappointments are expected to increase. Asset markets will appear to have run out of upside potential, and risk of a correction in global risk appetite will increase.”
BNP Paribas said “the current rise of risk appetite will not be sustainable into the fourth quarter,” which may eventually weaken the euro.
Loans to households and companies in Europe rose 1.8 percent from a year earlier, the smallest annual increase since records began in 1991, the European Central Bank said today. M3 money-supply growth, which the ECB uses as a gauge of future inflation, slowed to 3.7 percent from 4.9 percent.
‘Negative Implications’
“The failure to address problems in the banking sector will eventually have broader negative implications for the economy and the euro,” currency strategists led by Hans-Guenter Redeker at BNP in London wrote in a note today. “This process appears to have started with the continued collapse of the euro- zone money supply data, which suggests that the weakness of European bank balance sheets is already having an impact.”
Asian currencies headed for quarterly gains versus the dollar as speculation the worldwide economic slump is easing fueled demand for emerging-market securities.
The rupiah advanced today on speculation Indonesian President Susilo Bambang Yudhoyono will win re-election next month and introduce policies to support growth in Southeast Asia’s largest economy. The won gained as the Kospi Index of equities posted its best quarter in two years.
“Most countries are moving along with a refreshing recovery trend that should be good for markets,” said Yeo Chin Tiong, head of treasury at OSK Investment Bank Bhd. in Kuala Lumpur. “The economies are chugging along, not fantastic, but stock and currency markets are trading on feel-good sentiment.”
The rupiah rose 0.3 percent to 10,208 per dollar, increasing this quarter’s gain to 15 percent. The South Korean won appreciated 1 percent to 1,273.70 for an 8.6 percent advance since March 31.
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