BLBG:Euro Rises as Spanish Debt Sale Exceeds Maximum Target Before ECB Meets
The euro strengthened the most in a week against the yen after Spain sold almost twice its maximum target of debt at an auction today, boosting demand for the 17- nation currency.
The euro rose versus all but two of its 16 major counterparts as Italian borrowing costs dropped at a bill sale, spurring optimism the sovereign debt crisis is easing. European Central Bank policy makers meeting today will leave the benchmark interest rate of 1 percent, according to a Bloomberg News survey. The pound stayed lower against the euro as the Bank of England kept interest rates at a record low.
“The Spanish action results are good,” said Jane Foley, a senior currency strategist at Rabobank International in London. “Not only did the government manage to shift more paper than it had indicated but yields are lower on the three year,” which will help support the euro.
The euro rose 0.4 percent to 98.07 yen at 12:11 p.m. London time after advancing 0.5 percent, the biggest intraday gain since Jan. 3. It dropped to 97.28 yen on Jan. 9, the weakest since December 2000. The shared currency climbed 0.4 percent to $1.2758, after falling to $1.2662 yesterday, the lowest since September 2010. The dollar was little changed at 76.86 yen.
Spain sold 9.98 billion euros of debt, versus the maximum target of 5 billion euros set for the sale. It auctioned 4.27 billion euros of new benchmark three-year notes at an average yield of 3.384 percent, down from 5.187 percent at the previous auction of similar-dated securities on Dec. 1.
Italy sold 8.5 billion euros of one-year bills at 2.735 percent, versus 5.952 percent at the prior auction of similar- maturity debt on Dec. 12. It also auctioned 136-day bills.
ECB Meeting
Only six of 53 economists in a Bloomberg News survey predict the ECB’s Governing Council will cut its key rate today to what would be a new record low. The central bank lowered the main rate by a quarter percentage point for a second month on Dec. 8 and offered the region’s banks as much money as they needed for three years.
“We don’t expect a change in policy,” said Paul Robson, a senior foreign-exchange strategist at Royal Bank of Scotland Group Plc in London. “Next month is the month to concentrate on. The ECB have cut policy previously and also announced a string of new liquidity measures so I think they’ll be looking to see how that plays out.”
Industrial Production
Industrial production in the euro region declined by less than investors forecast in November, the European Union’s statistics office said today. Production fell 0.1 percent from October, when it dropped a revised 0.3 percent. Economists had forecast a decline of 0.3 percent, the median of 26 estimates in a Bloomberg News survey showed.
The pound weakened against 12 of its 16 major counterparts as the Bank of England’s Monetary Policy Committee held its key interest rate at 0.5 percent, in line with the forecast of all 53 analysts in a Bloomberg News survey. The central bank maintained its bond-buying target at 275 billion pounds.
The pound declined 0.2 percent to 83.10 pence per euro. Sterling was 0.2 percent stronger at $1.5353, after earlier falling to $1.5279, the weakest level since Oct. 6.
----With assistance from Anchalee Worrachate in London, Kristine Aquino in Singapore and Candice Zachariahs in Sydney. Editors: Nicholas Reynolds, Paul Dobson
To contact the reporters on this story: David Goodman in London at dgoodman28@bloomberg.net; Keith Jenkins in London at kjenkins3@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
