Dollar Falls From 14-Month High as Production Declines

The dollar fell from the highest level in 14 months against its major peers after data showed U.S. industrial production unexpectedly dropped in August.

The Bloomberg Dollar Spot Index climbed earlier amid bets the Federal Reserve will change its stance this week on keeping rates low for a “considerable” time after ending bond purchases. U.S. Treasury yields declined, damping the appeal of dollar-denominated assets, and the greenback fell against the yen for the first time in six days. A gauge of emerging-market currencies decreased.

“Soft data did contribute to today’s move; Treasury yields are slightly lower,” Eric Viloria, a strategist at Wells Fargo & Co. in New York, said in a phone interview. “There’s a bit of cautiousness ahead of the Fed meeting. Positioning in dollar longs is a bit stretched. That could restrain the dollar going forward.” Long positions are bets a currency will gain.

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major currencies, fell as much as 0.1 percent to 1,049.31 after rising earlier to 1,052.14, the highest since July 2013. It was little changed at 1,050.55 at 5 p.m. New York time.

The dollar weakened 0.1 percent to 107.19 yen after reaching 107.39 yen on Sept. 12, the strongest since September 2008. The U.S. currency gained 0.2 percent to $1.2940 per euro. The European currency fell 0.3 percent to 138.70 yen. Japanese financial markets were shut today for a national holiday.

Aussie Drops

Australia’s dollar dropped as much as 0.6 percent to 89.84 U.S. cents, the lowest since March 12, after the weakest growth in China, the nation’s biggest trade partner, since the global financial crisis. The Aussie pared its loss to 90.28 cents.

“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.”

Chinese industrial output rose 6.9 percent from a year earlier in August, the statistics bureau said Sept. 13. That was down from 9 percent 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.

Output at U.S. factories, mines and utilities fell 0.1 percent in August after a 0.2 percent gain the prior month that was smaller than previously reported, Fed data showed. The median forecast in a Bloomberg survey of 79 economists called for a 0.3 percent rise. Manufacturing declined 0.4 percent as auto production slumped 7.6 percent.

Source: yahoo.com