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Dollar Nears 7-Year High to Yen on U.S. Ruble, Gold Drop

The dollar jumped to an almost seven-year high versus the yen, oil fell and bonds rose as slowing Chinese manufacturing growth and the Bank of Japan’s unexpected stimulus highlighted diverging growth outlooks for the U.S., Asia and Europe. The ruble fell and natural gas futures gained.

The Bloomberg Dollar Spot Index advanced 0.3 percent by 8:26 a.m. in London, as the greenback bought 112.76 yen, the most since December 2007. The euro was near a two-year low and gold fell 0.4 percent to $1,168.85 an ounce in the spot market. West Texas Intermediate crude dropped 0.6 percent and gas futures surged 4.1 percent on forecasts for cold U.S. weather. Standard & Poor’s 500 Index futures were little changed and Treasuries rallied. Russia’s currency slid 1.1 percent.

The dollar gauge is heading for a level last seen in June 2010 after U.S. consumer-confidence and manufacturing reports Oct. 31 underscored the strength of the world’s biggest economy relative to the outlooks in Europe and Asia. An official gauge of Chinese factory output unexpectedly dropped in October, data at the weekend showed, while a private gauge today was unchanged from September. Japan’s markets are closed for a holiday after the country’s central bank surprised investors by increasing its unprecedented monetary easing program.

“The dollar’s strength will continue to persist given the widening interest-rate outlooks between the U.S., Japan and Eurozone,” Audrey Goh, a Singapore-based investment strategist at Standard Chartered Plc, said by phone. “Growth momentum in the U.S. has been quite robust. Europe, on the other hand, is continuing to see weakening economic data. That will pressure the ECB to do more easing, following the BOJ’s move last week.”

Euro, Franc

The Swiss franc retreated and the euro dropped 0.3 percent to $1.2490 after falling to as low as $1.244, the lowest intraday level since Aug. 22, 2012. The European Central Bank, which meets this week, is also expanding its stimulus efforts, cutting interest rates twice since June and starting asset purchases and a targeted loan plan for banks. Inflation in the 18-nation region accelerated from a five-year low in October, data Oct. 31 showed.

The ruble retreated to 43.5010 to the U.S. dollar, continuing a slide that was only briefly interrupted on Oct. 31 when by a larger-than-forecast increase of Russia’s key interest rate. The Bank of Russia raised its key rate to 9.5 percent percent from 8 percent, according to a website statement. That surprised all 31 economists surveyed by Bloomberg. The currency slid 0.8 percent to 54.3805 per euro.

Yen Prospects

The yen tumbled 2.9 percent Oct. 31 after the unexpected BOJ announcement, which saw five of nine BOJ board members — including Governor Haruhiko Kuroda — vote in favor of raising the annual target for enlarging the monetary base to 80 trillion yen ($710 billion), from a range of 60 to 70 trillion yen previously. The currency dropped as much as 0.6 percent today to 112.99 per dollar after losing 3.9 percent last week, its worst such slump since December 2009.

“The more you look at both the strengthening U.S. data and what the BOJ has done the more you think that the yen has further to go,” Sam Tuck, a senior currency strategist at ANZ Bank New Zealand Ltd., said by phone from Auckland.

Nikkei 225 Stock Average futures traded in Singapore are signaling Japanese equities may rally further when markets open tomorrow. The December contract traded as high as 17,070 today, 4 percent above the underlying gauge’s close on Oct. 31, when it surged 4.8 percent. The Nikkei 225 hasn’t traded above 17,000 since October 2007.

Europe Stocks

The Stoxx Europe 600 Index was little changed today after jumping 1.8 percent on Oct. 31. Diageo Plc climbed 0.7 percent, heading for a sixth straight gain. The liquor maker agreed to trade its Bushmills Irish whiskey brand to Jose Cuervo Overseas as part of a deal to acquire full control of Tequila Don Julio and $408 million in cash.

Ryanair Holdings Plc (RYA) surged 8.6 percent after the budget airline operator upgraded its full-year profit goal for the second time this year, saying that any slowdown in the European economy could push people in its direction.

HSBC Holdings Plc (HSBA), Europe’s largest listed bank, slipped 2 percent in London after reporting earnings that missed estimates.

U.S. data last week showed the world’s largest economy grew an annualized 3.5 percent in the third quarter, exceeding estimates and, with declining applications for unemployment benefits, helping to validate the Fed’s decision to end a third round of asset purchases.

Gold extended declines today after sliding 2.2 percent Oct. 31 and touching $1,161.35, its lowest intraday price since July 2010. The precious metal dropped 4.7 percent last week to cap a second straight monthly loss.

Hong Kong

Silver slipped 1 percent to $15.9908 an ounce today, after reaching $15.7908 Oct. 31, its lowest level since February 2010. Platinum fell 0.1 percent while palladium added 0.5 percent.

The Hang Seng China Enterprises Index slid 0.9 percent in Hong Kong. A pullback in services and manufacturing will test the Chinese government’s determination to refrain from increased stimulus as the world’s second-largest economy heads toward the slowest full-year growth since 1990. The economy expanded 7.3 percent in the third quarter, the weakest pace in more than five years. Australia’s dollar retreated 0.6 percent to 87.44 U.S. cents.

Oil futures dropped to $80.02 in New York after sliding below $80 during trading on Oct. 31. Brent crude weakened 0.4 percent to $85.45 in London. Saudi Arabia is set to announce crude-export prices for next month after charging the least in almost six years for some November shipments to Asia.

(Source: Bloomberg)