Dollar Rises for Third Day as Commodities Drop on Korea, China
Dec. 8 (Bloomberg) -- The dollar rose for a third day, commodities dropped and stocks fell amid concern tensions in the Korean peninsula will worsen and that China will increase interest rates. Treasuries and German government bonds tumbled.
The Dollar Index, which tracks the U.S. currency against six trading partners, added 0.5 percent at 4:40 p.m. in Tokyo. The won dropped 1.3 percent. Oil and copper declined more than 1 percent. The MSCI Asia Pacific Index sank 0.9 percent. Standard & Poor's 500 Index futures slid 0.4 percent, while those on the Euro Stoxx 50 index dropped 0.7 percent. Ten-year Treasury yields rose to a five-month high while the 10-year bund yield topped 3 percent for the first time since May 10.
Yonhap News reported that North Korea fired artillery shells near the disputed border on the peninsula, two weeks after an attack on the South's Yeonpyeong island killed four. China's statistics bureau is bringing forward the release of November economic data including inflation and retail sales figures by two days to Dec. 11 as investors speculated the central bank is preparing to raise borrowing costs.
"Markets tend to go hot and cold on expectations that Chinese authorities will take more steps in their tightening campaign," said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors Ltd., which manages about $93 billion and is a unit of AMP Ltd., Australia's second-largest asset manager. "There is pressure on interest rates in China, but I don't think there's any reason they'd want to crush growth."
Artillery Shelling
The dollar gained against 15 of its 16 most actively traded counterparts and traded at $1.3203 per euro from $1.3261. It strengthened to 83.95 yen from 83.49 yen yesterday, when it touched 82.34 yen, the lowest level since Nov. 12. Against the greenback, South Korea's won traded at 1,146.10 and earlier slid as much as 1.4 percent.
North Korea may have fired artillery shells into its water near the disputed western border with South Korea today, a government official in Seoul said. None of the shells crossed the border into South Korean waters and the government is examining the incident, an official at President Lee Myung Bak's office said by telephone from Seoul, confirming reports by Yonhap News and YTN television broadcaster.
Copper declined from a record, snapping its longest rally in more than four months. The metal for three-month delivery on the London Metal Exchange fell as much as 1.8 percent to $8,725 a metric ton. It reached a record $9,044 a ton yesterday. Zinc fell as much as 4 percent while nickel dropped 2.6 percent.
Oil Retreats
Oil declined for a second day, dropping 1.1 percent to $87.73 a barrel in New York, amid speculation fuel demand will decrease after an industry report showed U.S. gasoline supplies surged the most since January.
China's benchmark money-market rate rose the most in more than a week on speculation policy makers will boost interest rates as early as this weekend to help damp inflation. The nation is expected to report on Dec. 11 that consumer prices climbed 4.7 percent from a year earlier in November, the most since August 2008, based on the median estimate in a Bloomberg survey of economists.
"Investors will be very cautious before this weekend pending the announcement of November inflation and a possible interest-rate hike," said Li Jun, a strategist at Central China Securities Co. in Shanghai. "Uncertainty is about to peak and this may drag the market down."
Cnooc, Vanke
Industry groups tracking commodity producers and energy companies were the biggest decliners on the MSCI Asian index. Jiangxi Copper Co. retreated 2.6 percent in Hong Kong and Cnooc Ltd. tumbled 3.3 percent. Real estate developers dropped in China, led by a 2 percent loss in China Vanke Co., after the China Securities Journal reported Shanghai will be among the first group of cities to undertake property tax trials.
Sony Corp. and Nintendo Co. climbed at least 1.3 percent, leading gains in Japan. Sony generated about 70 percent of its revenue outside Japan in the year ended March 2010, while Nintendo got about 45 percent of its sales in the Americas.
"A weaker yen is positive for exporters, so investor pessimism is receding," said Hideo Arimura, who helps oversee about $2.2 billion at Mizuho Asset Management Co. in Tokyo. "If the yen were to strengthen, that would drag down earnings for carmakers and other exporters."
Yields on the benchmark 10-year Treasury note rallied 8.5 basis points to 3.21 percent. The yield jumped 21 basis points, or 0.21 percentage point, yesterday after President Barack Obama agreed to a two-year extension on all Bush-era tax cuts.
The notes extended losses today amid speculation demand will wane at a $21 billion sale of the securities today. At yesterday's three-year note auction, the securities drew a yield of 0.862 percent, compared with the average forecast of 0.841 percent in a Bloomberg News survey of primary dealers.
Yields also climbed before reports this week that may show U.S. jobless claims fell by 11,000 to 425,000 in the week ended Dec. 4, and the Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose to 72.5 in December from 71.6 the prior month, according to surveys by Bloomberg.
Japanese government bonds fell, sending the yield on the 10-year bond six basis points higher to 1.23 percent. The 10- year bund yield rose seven basis points to 3.02 percent in London, while the yield on the two-year note climbed three basis points to 0.90 percent.
To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net Shani Raja in Sydney at sraja4@bloomberg.net .
To contact the editor responsible for this story: Nicolas Johnson at nicojohnson@bloomberg.net .
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