BLBG:Dollar, Yen Fall on Stock Gains, Optimism European Leaders to Solve Crisis
The dollar and yen weakened as gains in stocks and speculation European leaders are taking steps to stem the region’s debt crisis curbed demand for safer assets.
The euro climbed from a eight-week low versus the U.S. currency after German Finance Minister Wolfgang Schaeuble urged fast-track treaty changes to tighten budget discipline to calm markets. The euro held gains even as an International Monetary Fund official said the organization isn’t in talks with Italy about a loan program. New Zealand’s dollar strengthened after Prime Minister John Key was re-elected with his party’s strongest support in 60 years.
“The dollar and yen are being sold because of risk-on market sentiment,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp., a currency margin company. “Gains in stocks are a catalyst.”
The dollar weakened 0.5 percent to $1.3308 per euro at 8:16 a.m. London time, after rising to $1.3212 on Nov. 25, the strongest since Oct. 4. The yen declined 0.5 percent to 103.41 per euro. The greenback was little changed at 77.71 yen.
The MSCI Asia Pacific Index (MXAP) of stocks gained 1.9 percent and the Stoxx Europe 600 Index advanced 1.6 percent.
A treaty change is necessary to give veto power over member-state budgets to the European Union Commission, Germany’s Schaeuble said in an interview with ARD television in Berlin yesterday. “We can do that quickly and this will send an important signal to markets that the euro is and remains a stable currency,” he said.
Stability Pact
German Chancellor Angela Merkel and French President Nicolas Sarkozy are planning a fast-track stability pact to stem the crisis, Welt am Sonntag reported, without saying where it got the information. Europe’s two biggest economies would start a coalition of euro-zone members that would commit to greater fiscal discipline without waiting to change EU treaties, according to the newspaper.
The euro held gains even after the IMF said it isn’t discussing a loan program with Italy. “There are no discussions with the Italian authorities on a program for IMF financing,” a spokesperson said in an e-mailed statement.
Italian newspaper La Stampa reported earlier that the Washington-based lender is preparing a 600-billion euro loan for Italy in case the debt crisis worsens, without saying where it got the information.
Not Sufficient
The IMF had about $390 billion available for lending as of Nov. 17, which Managing Director Christine Lagarde has said may not suffice to meet loan demand if the global outlook worsens.
“We continue to expect corrective gains in the euro will be short-lived and subject to headline risks,” Marc Chandler, chief currency strategist at Brown Brothers Harriman & Co., wrote in a note to clients. “We still believe that the $1.29 year-end target for the euro is reasonable.”
The shared currency has fallen 4.1 percent against the dollar this month, headed for the biggest loss since September, amid signs European growth is losing momentum.
An index of consumer confidence in Germany, the region’s biggest economy, will drop to 5.1 in December from 5.3 in November, according to economists surveyed by Bloomberg News before the GfK SE report today. That would be the lowest since October 2010.
A final reading of a similar index that covers the whole of the euro area fell to minus 20.4 from minus 19.9 in October, according to a separate survey before the European Commission data tomorrow.
‘Temporary Boost’
“The story here is more of a temporary boost to the euro, but the emphasis on the word ‘temporary,’” said Joseph Capurso, a currency strategist at Commonwealth Bank of Australia in Sydney. The euro area’s “economy is in recession, or near a recession. That’s going to make it much harder for the governments to cut back their deficits.”
New Zealand’s dollar rose against all but one of its 16 major counterparts after Key was re-elected with a larger majority, strengthening his ability to balance the budget.
“The market liked the clean result and the fact that we’re going to have a stable government for the next three years,” said Khoon Goh, head of market economics and strategy at ANZ National Bank Ltd. in Wellington. “The market took that very positively and the kiwi has managed to do quite well today.”
New Zealand’s dollar advanced 1.4 percent to 75.06 U.S. cents, and gained 1.5 percent to 58.34 yen.
To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; Keith Jenkins in London at Kjenkins3@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
