Dollar Falls to Six-Week Low as Earnings Encourage Yield Demand

New York -  The dollar dropped to a six-week low against the euro and the yen slid on bets higher-yielding assets will gain on increased company earnings and as CIT Group Inc. was said to be close to a $3 billion lifeline from bondholders.

New Zealand’s dollar climbed versus its U.S. counterpart to the highest level since early June and the Canadian currency advanced after crude oil and other commodity prices rose. The pound climbed the most in more than a week as a report showed asking prices for U.K. homes increased this month.

“People are looking for risk assets, not with a lot of conviction, but with equities there is some appetite,” said Brian Kim, a foreign-exchange strategist in Stamford, Connecticut, at UBS AG, the world’s second-largest currency trader. “They’re leaning away from safe havens, and the dollar and yen kind of suffered.”

The dollar slid 0.9 percent to $1.4230 per euro at 9:23 a.m. in New York, from $1.4102 on July 17. It reached $1.4248, the weakest level since June 5. The yen depreciated 1.2 percent to 134.41 per euro from 132.85 after trading at 134.76, the weakest level since July 3. Japan’s currency declined 0.3 percent to 94.49 versus the dollar from 94.19.

New Zealand’s dollar increased as much as 1.8 percent to 65.63 cents, the strongest level since June 3, as the Reuters/Jefferies CRB Index of 19 raw materials rose for a sixth day, gaining 0.4 percent. Commodities make up half of New Zealand’s export revenue.

The Canadian dollar advanced as much as 1 percent to C$1.1020, the strongest level since June 12, after crude oil, the nation’s biggest export, rose as much as 2.1 percent to $64.90 a barrel.

Weaker Yen

The yen weakened versus all of the 16 most-traded currencies tracked by Bloomberg, dropping 1.9 percent to 61.90 versus the New Zealand dollar and decreasing 1.6 percent to 76.82 against Australia’s dollar on speculation investors will increase carry trades, in which they borrow in a country with low interest rates and buy assets where returns are higher.

Benchmark interest rates are 2.5 percent in New Zealand and 3 percent in Australia, compared with 0.1 percent in Japan and as a low as zero in the U.S.

The board of the New York-based lender CIT was scheduled to meet today to discuss a bridge-financing offer that would give the company time to restructure its debt and avoid bankruptcy, according to a person briefed on the firm’s deliberations.

Leading Indicators

The New York-based Conference Board’s gauge of the economic outlook for the next three to six months increased 0.5 percent in June, according to the median forecast of 46 economists surveyed by Bloomberg News. It would be the first time the index of leading indicators climbed for three months in a row since 2004. The report is due at 10 a.m. New York time.

“We’re looking for a risk rally this week,” Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London, wrote in a note to clients today. “The yen should remain on the back burner whilst Australian and New Zealand dollars should produce higher price action.”

The yen and dollar also weakened before U.S. companies such as State Street Corp. report earnings this week. Standard & Poor’s 500 firms that have announced results since July 8 topped estimates by an average of 15 percent, according to data compiled by Bloomberg.

The Dollar Index, which the ICE uses to track the currency against those of six major U.S. trading partners, fell 0.6 percent to 78.884. It dropped to 78.799 earlier, the lowest level since June 3.

Stronger Pound

The pound rose as much as 1.3 percent to $1.6550 against the dollar, the biggest intraday gain since July 9, after Rightmove Plc, the operator of the U.K.’s biggest residential property Web site, said the average costs of a British home increased 0.6 percent this month, after falling 0.4 percent in June. The British currency climbed 1.5 percent to 156.11 yen.

Futures traders increased bets to the highest level in five months that the yen will strengthen against the dollar, figures from the Washington-based Commodity Futures Trading Commission showed on July 17.

The difference in the number of wagers by hedge funds and other large speculators on a gain in the yen compared with those on a drop -- so-called net longs -- reached 33,567 on July 14, the most since February, versus net longs of 17,117 a week earlier. The figures are sometimes used as a contrary indicator.

Less than a month after betting the Swiss National Bank’s franc sales would fail to halt its rise, investors are the least bullish since 2007, options prices show. This year’s five most- accurate franc forecasters in Bloomberg surveys see the currency trading between 1.50 and 1.55 per euro by Dec. 31, the range it has been in since after the bank started intervening March 12. The franc was little changed at 1.5188 per euro today.