SFG:Euro, Kiwi Gain as Asia Stocks Fall on Rate Outlook; Oil Rises
June 9 (Bloomberg) -- The euro and New Zealand's dollar led gains in higher-yielding currencies and Asian stocks fell on concern central banks will raise interest rates even as the global recovery slows. Oil climbed for a third day in New York after OPEC kept output targets unchanged.
Europe's 17-nation currency climbed 0.2 percent to $1.4616, near a one-month high, and rise 0.5 percent to 117.09 yen at 3 p.m. in Tokyo. The so-called kiwi jumped 0.4 percent. The MSCI Asia Pacific Index fell 0.6 percent. Futures on the Standard & Poor's 500 Index gained 0.2 percent after a six-day slump. Euro Stoxx 50 Index futures slid 0.2 percent. The cost of insuring Japanese corporate bonds climbed to the highest in almost two months, traders said. Oil added 0.6 percent in New York.
European Central Bank President Jean-Claude Trichet may signal today policy makers will raise interest rates next month. New Zealand's central bank said borrowing costs will need to increase in the next two years, while Brazil's lifted rates for a fourth straight meeting yesterday. Inflation pressure may intensify after OPEC failed to agree on crude production for the first time in at least 20 years.
"Central banks face a dilemma in striking a balance between growth and inflation," said Lye Thim Loong, who helps manage about $770 million at Avenue Invest Bhd. in Kuala Lumpur. "The good times have passed for companies, business costs remain high on energy prices, consumers are feeling the heat and demand will taper off, translating to lower earnings."
The euro strengthened against most of its 16 most-traded peers as a Credit Suisse Group AG index based on swaps trading indicated the central bank will lift its benchmark rate by 79 basis points over the next year. The prediction was for 73 basis points a week earlier.
Rate Outlook
All 52 economists surveyed by Bloomberg News forecast the ECB will leave its main interest rate at 1.25 percent when policy makers meet in Frankfurt today. The central bank raised borrowing costs in April for the first time in almost three years, bringing the main refinancing rate to 1.25 percent.
"The markets are expecting Trichet to signal a hike in July," said Khoon Goh, head of market economics and strategy at ANZ National Bank Ltd. in Wellington. "If he does that, the yield story will continue to provide support for the euro."
The New Zealand dollar rallied to 81.78 U.S. cents and earlier reached 82.45 cents after the central bank said commodity prices remain "very strong" and interest rates will rise within two years. The kiwi reached a record 82.64 cents on May 31. Malaysia's ringgit rose 0.3 percent to 3.017 per dollar.
Rate Outlook
Brazil's central bank raised its benchmark interest rate by a quarter point to 12.25 percent, a decision expected by 51 of 52 analysts surveyed by Bloomberg. Policy makers in the U.K. and Indonesia are set to decide on borrowing costs today, while the Bank of Korea will weigh an interest-rate increase tomorrow.
The Australian dollar slid 0.4 percent to $1.0578 after a statistics bureau report showed the nation's employers added fewer jobs than economists forecast.
The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, declined 0.1 percent. Pacific Investment Management Co.'s Bill Gross said yesterday that foreigners are questioning the dollar's role as the world's reserve currency because of U.S. policies that keep borrowing rates low to reduce the nation's debt burden.
MSCI's Asia Pacific Index was set for its lowest close since May 25. New Zealand's NZX 50 Index dropped 1 percent, Hong Kong's Hang Seng Index sank 0.9 percent, while China's Shanghai Composite Index slipped 0.9 percent.
