BS: Euro Trades Near One-Week High as Europe’s Debt Concern Eases
By Bo Nielsen
June 11 (Bloomberg) -- The euro traded near a one-week high against the dollar and yen on eased concern Europe’s sovereign- debt crisis will slow the global economic recovery.
Europe’s currency was poised to end its longest stretch of weekly losses against the yen as stocks advanced, reducing demand for a refuge in Japan’s currency. European Central Bank President Jean-Claude Trichet said yesterday offerings of unlimited cash at a fixed interest rate will continue.
“The euro has piggy-backed on the good news out of the ECB and on the macro front, which helped stock markets to rally this week,” said Lee Hardman, a London-based foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. “But we see no clear drivers in the horizon to sustain a rise in the euro.”
The euro traded at $1.2138 at 7:48 a.m. in New York, compared with $1.2124 yesterday, after reaching $1.2148, the highest level since June 4. The shared currency increased 0.5 percent to 111.31 yen, from 110.72, after earlier climbing to 111.36, the strongest level since June 4. The dollar advanced 0.4 percent to 91.69 yen, from 91.34.
The MSCI World Index of global stocks rose 0.4 percent in its fourth straight gain.
Europe’s currency was headed for a 1.4 percent gain against the dollar this week. The euro’s rally against the yen would be the first after six weeks of losses, the longest stretch of decreases since the European currency’s 1999 debut.
Dollar Versus Yen
Yuan forwards rose to the highest level this month yesterday after Treasury Secretary Timothy F. Geithner said 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 was little changed at 6.7483 per dollar today after reaching 6.7375 yesterday, the strongest level since May 28.
Aussie Drop
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 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 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 0.5 percent to 84.62 U.S. cents. The currency is still set for a 2.7 percent advance this week, the largest since January. The New Zealand dollar dropped 0.8 percent to 68.13 cents.
Asian Selling
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 Securities Group Inc. 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.”
--With assistance from Candice Zachariahs in Sydney. Editors: Dennis Fitzgerald
To contact the reporter on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
