BLBG: Euro Near One-Week High as Concern at Europe Debt Crisis Eases
By Candice Zachariahs
June 11 (Bloomberg) -- The euro traded near a one-week high against the dollar and the yen as concern waned that Europe’s debt crisis will derail global growth.
Europe’s currency was also poised to end its longest stretch of weekly losses against the yen as stocks advanced around the world, increasing demand for riskier assets. The dollar gained versus the yen before a report that economists said will show U.S. consumer confidence increased. Yuan forwards rose to the highest level this month as U.S. officials stepped up calls for China to allow its currency to strengthen.
“The panic scenario has been eliminated for now and the euro may grind higher,” said Phil Burke, chief dealer for foreign-exchange trading in Sydney at JPMorgan Chase & Co., the second-largest U.S. bank. “There should be a slightly bullish bias short term.”
The euro traded at 110.99 yen as of 6:48 a.m. in London from 110.72 yen yesterday in New York, having gained 0.9 percent this week. It earlier climbed to 111.28 yen, the strongest since June 4. The euro was at $1.2115 from $1.2124, after reaching $1.2148, the highest since June 4. The yen weakened to 91.57 per dollar from 91.34.
Europe’s currency is set for a 1.2 percent gain against the dollar this week. The euro’s rally against the yen snaps a six- week loss that was the longest since its introduction in 1999.
Consumer Sentiment
The dollar advanced for a second day against the yen before today’s release of a Thomson Reuters/University of Michigan index of U.S. consumer sentiment. The index increased to 74.5 for June from 73.6 the prior month, according to a Bloomberg survey. Retail sales gained 0.2 percent in May, according to a separate Bloomberg survey.
Yuan forwards rose after U.S. Treasury Secretary Timothy F. Geithner said yesterday China’s exchange-rate policy prevents a balanced global recovery and urged a stronger yuan to help contain inflation in the world’s third-largest economy.
“The distortions caused by China’s exchange rate spread far beyond China’s borders and are an impediment to the global rebalancing we need,” Geithner said in testimony to the Senate Finance Committee. China’s commerce ministry said hours later that the yuan’s peg to the dollar remains unchanged and the country’s policy was made clear to the U.S. in talks last month.
The yuan’s 12-month non-deliverable forwards rose 0.3 percent to 6.7630 per dollar, according to Bloomberg data.
Australian Dollar
The Australian and New Zealand dollars fell, paring weekly gains, on speculation export demand will wane as China takes steps to cool its economy.
The so-called Aussie declined for the first time in four days against the greenback after a report showed China’s inflation accelerated more than economists expected.
“Higher Chinese inflation may lead to earlier-than- expected rate hikes or revaluation of the currency,” said Masafumi Yamamoto, chief currency strategist at Barclays Bank Plc in Tokyo. “This may lead to some risk aversion, so after building long positions on the Aussie and kiwi, the news may have caused some profit taking.” A long position is a bet a currency will strengthen.
Australia’s dollar weakened 0.7 percent to 84.44 U.S. cents. The currency is still set for a 2.6 percent advance this week, the largest since January. The New Zealand dollar dropped 0.8 percent to 68.13 cents.
Policy makers in South Korea, Taiwan and China are responding to Europe’s debt crisis by selling their currencies even as they weaken against the dollar, limiting fixed-income investment inflows and delaying interest-rate increases.
Goldman Sachs Group Inc. slashed its three-month Indian rupee forecast by 7 percent this week, Westpac Banking Corp. cut its year-end estimate for the won by 8.3 percent and ING Groep NV said the yuan won’t be revalued for a year.
“With the euro plunging, some central banks seem to be quite aggressive in stemming gains in their currencies,” said Kenichiro Ikezawa, who oversees about $3 billion as a fund manager at Daiwa SB Investments Ltd. in Tokyo and favors Brazilian and Australian debt over emerging-market Asian bonds. “China may delay revaluation and that, together with low yields in Asia, give little incentive to buy them.”
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net.
