BS: Euro Rises to Eight-Week High as Trichet Sees Stronger Growth
By Catarina Saraiva and Matthew Brown
July 8 (Bloomberg) -- The euro climbed above $1.27 for the first time since May as European Central Bank President Jean- Claude Trichet said the economic recovery is gaining momentum.
The yen and dollar dropped against most of their major counterparts as the International Monetary Fund raised its global growth forecast and U.S. initial jobless claims dropped last week, spurring demand for higher-yielding assets. The pound fell from a two-month high against the dollar as the Bank of England kept its bond-buying stimulus program unchanged.
“We’ve had a string of data which gives us some hope that the economic recovery is not going off track,” said Carl Forcheski, a director on the corporate currency sales desk at Societe Generale SA in New York. There’s “more of a risk-on type of attitude, so we’re seeing the euro a little bit firmer,” Forcheski said.
The euro gained 0.3 percent to $1.2675 at 11:10 a.m. in New York, from $1.2638 yesterday, after advancing to $1.2702, the highest level since May 12. The shared currency increased 1.2 percent to 112.14 yen, from 110.84, after reaching 112.51, the highest since June 21. Japan’s currency weakened 0.9 percent to 88.46 per dollar, from 87.70.
At a press conference in Frankfurt today, Trichet said “indicators suggest that a strengthening in economic activity took place during the spring.” The ECB’s main interest rate is “appropriate,” and inflation expectations “remain firmly anchored,” he said.
ECB’s Rate
The euro also appreciated on speculation stress tests for European banks were assuming smaller losses on Greek bonds than some investors anticipated.
European regulators have told lenders their planned tests may assume a loss of about 17 percent on Greek debt and 3 percent on Spanish bonds, according to two people briefed on the talks. Credit markets are pricing in losses of about 60 percent on Greek bonds should the government default.
“What the stress-test results might do is help to calm investor nerves,” said Khoon Goh, senior market economist at ANZ National Bank Ltd. in Wellington. “Investors are starting to reduce exposure in dollars and diversify into euros.”
Britain’s Housing
U.K. house prices decreased 0.6 percent in June from a month earlier, Halifax, a unit of Lloyds Banking Group Plc, reported. Manufacturing output climbed 0.3 percent in May after a revised drop of 0.8 percent in the previous month, twice the rate of decline previously estimated, the Office for National Statistics said.
The pound slid 0.2 percent to $1.5153, from $1.5189, after rising to $1.5241, the highest level since May 4. Sterling depreciated 0.6 percent to 83.67 pence per euro.
South Africa’s rand climbed 1.9 percent to 11.74 yen and New Zealand’s dollar advanced 0.8 percent to 70.90 U.S. cents as evidence of economic recovery discouraged demand for a refuge.
IMF’s Outlook
The global economy will expand 4.6 percent in 2010, the biggest gain since 2007, compared with an April projection of 4.2 percent, the Washington-based IMF said in revisions yesterday to its World Economic Outlook.
The yen typically strengthens in times of financial uncertainty because Japan’s trade surplus frees the nation from dependence on overseas capital. The dollar benefits as the world’s principal reserve currency.
Australia’s dollar climbed 1 percent to 87.25 U.S. cents after a report showed employers added three times more jobs in June than economists predicted.
The Aussie may extend its advance versus its Canadian counterpart as China’s growth benefits the South Pacific nation while the North American country is more at risk of suffering from a U.S. slowdown, Goldman Sachs Group Inc. said.
Investors should buy Australia’s dollar, targeting gains to 95 Canadian cents, and exit the trade if it closes below 88.5 Canadian cents, Goldman Sachs analysts including London-based Fiona Lake wrote in a note to clients.
The Aussie appreciated 0.6 percent to 91 Canadian cents.
--Editors: Dennis Fitzgerald, Paul Cox
To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Matthew Brown in London at mbrown42@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
