BLBG:Euro Climbs to Three-Week High Versus Dollar on Rate Prospects; Won Gains
The euro rose to a three-week high against the dollar on prospects the European Central Bank will increase interest rates next week to curb inflation and as the immediate risk of default by Greece subsided.
The common currency advanced against most major peers before a report forecast to show gains in European consumer prices accelerated in June. ECB President Jean-Claude Trichet said on June 28 that policy makers are in “strong vigilance mode” ahead of next week’s meeting. The dollar weakened before a report that may show U.S. business activity cooled. The New Zealand dollar gained to a record after data indicated business confidence improved and home-building approvals rose.
“Trichet has, in the last couple of days, been using the word ‘vigilance,’ so clearly we’re locked and loaded for an additional rate hike next week,” said Robert Rennie, chief currency strategist in Sydney at Westpac Banking Corp., Australia’s second-largest lender. “There’s an opportunity for the euro to move higher.”
The euro rose to $1.4505 at 1:08 p.m. in Tokyo from $1.4435 in New York yesterday. It earlier strengthened to $1.4519, the highest level since June 10. The euro was at 116.64 yen from 116.61 after advancing as much as 0.3 percent. The dollar traded at 80.41 yen from 80.78 yen.
The euro has increased 0.8 percent against the dollar this month and is up 2.5 percent for the quarter that ends today.
Greece’s Vote
Greek Prime Minister George Papandreou yesterday garnered enough votes for his 78 billion euro ($113 billion) package of budget cuts and state asset sales. Luxembourg’s Jean-Claude Juncker, who leads a group of euro-area finance ministers, said the Greek parliament’s decision paves the way for payment of the next aid installment from euro-area governments and the International Monetary Fund.
German financial companies pushed toward an agreement to roll over their Greek debt holdings as Deutsche Bank AG Chief Executive Officer Josef Ackermann predicted banks would contribute to help avert a “meltdown.”
Inflation in the euro region rose to 2.8 percent in June from a year earlier, compared with a 2.7 percent increase in May, according to the median estimate of economists surveyed by Bloomberg News. The European Union’s Luxembourg-based statistics office reports the data today.
ECB Outlook
“The ECB has entered a cycle of raising interest rates,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “I expect the euro to strengthen as the focus switches to interest rates as people prepare for the ECB meeting next week.”
The ECB raised its benchmark rate in April for the first time in almost three years, lifting it by a quarter point to 1.25 percent. The central bank will meet again on July 7.
The dollar approached a quarterly loss against 15 of its 16 most-traded counterparts amid signs of a slowing U.S. recovery.
The Institute for Supply Management-Chicago Inc. will say today its business barometer fell to 54.0 in June from 56.6 in May, the median estimate of economists in a Bloomberg News survey showed. Figures greater than 50 signal expansion.
“It’s hard for the dollar to be in an uptrend unless the economic recovery gathers real momentum in the U.S.,” said Hitoshi Asaoka, senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest bank.
IntercontinentalExchange Inc.’s Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, dropped for a fourth day, losing 0.5 percent to 74.290.
Kiwi Record
The New Zealand dollar reached a record against the U.S. currency after a survey by ANZ National Bank Ltd. showed a net 46.5 percent of companies in the country expect the economy will improve over the next year, up from 38.3 percent in May. The net figure subtracts the number of pessimists from the number of optimists. A government report showed home-building approvals in May climbed 2.2 percent, the second increase in three months.
“The business confidence numbers were quite constructive for the kiwi,” said Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong.
New Zealand’s dollar rose 0.7 percent to 83.08 U.S. cents, after reaching 83.19 cents, the highest since the currency was freely floated in 1985.
The won gained for a third day after Statistics Korea said industrial production climbed 8.3 percent in May from last year.
“The approval of Greece’s austerity measures helped ease uncertainties in the market, boosting demand for riskier assets,” said Han Sung Min, a currency dealer at Busan Bank in Seoul. “The rise in factory production is also supporting the won even though there’s speculation authorities may try to slow the won’s rapid gains.”
The won advanced 0.8 percent to 1,068.60 per dollar. It earlier advanced to 1,068.55, the strongest since May 3.
To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
