BLBG:Euro Advances as Spanish, Greek Borrowing Costs Decline at Debt Auctions
The euro rose against the dollar and the yen, snapping a two-day decline, as Spanish and Greek borrowing costs fell at auctions, damping concern the region’s most-indebted nations will struggle to fund their deficits.
The 17-nation European currency advanced from an 11-year low versus the yen as the ZEW Center for European Economic Research said its index (SXXP) of German economic sentiment posted a record increase in January and as Europe’s rescue fund sold more than its target at a bill auction. Australia’s dollar rose the most against the greenback among major currencies as a report showed China’s economy expanded at a faster pace than economists estimated, boosting demand for higher-yielding assets.
“The general theme today is risk-on,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “When you overlay this morning’s auctions with the improvement in the ZEW index, it all provides for a reasonable up-tick in the euro.”
The euro jumped 0.8 percent to $1.2769 at 7:05 a.m. New York time. It strengthened 0.8 percent to 98.06 yen. The dollar was little changed at 76.80 yen.
Spain sold 12-month debt at an average yield of 2.049 percent, compared with 4.05 percent at an auction on Dec. 13. It sold 18-month paper at 2.399 percent, down from 4.226 percent last month. Greece sold 1.625 billion euros of 13-week treasury bills today with a uniform yield of 4.64 percent, down from 4.68 percent at a Dec. 20 auction.
ZEW Index
Europe’s rescue fund, the European Financial Stability Facility, which had its rating cut to AA+ from AAA by Standard & Poor’s yesterday, got bids for 4.66 billion euros of 182-day bills, compared with a 1.5 billion-euro sales target.
The ZEW index, which aims to predict economic developments six months in advance, surged to minus 21.6 from minus 53.8 in December, its second straight increase. The gain of 32.2 points is the biggest since ZEW started the index in December 1991. Economists forecast a reading of minus 49.4, the median of 39 estimates in a Bloomberg News survey shows.
The euro has weakened 4.1 percent over the past six months, according to Bloomberg Correlation-Weighted Indexes. The yen has risen 8.9 percent, the best performance among the 10 currencies tracked by the gauges. The dollar advanced 7 percent.
“The euro is due a boost after it sold off so much in recent weeks,” said Jane Foley, a senior currency strategist at Rabobank International in London. “The ZEW survey was better than expected. That said, the euro remains very vulnerable to future developments in the region.”
Chinese GDP
Greek Prime Minister Lucas Papademos is due to meet tomorrow with a group representing private Greek bondholders after a five-day break to discuss forgiving at least half of the nation’s debt in the euro area’s first sovereign restructuring. Greece’s official creditors begin talks Jan. 20 on spending curbs and budget cuts that will determine whether to disburse additional aid.
China’s economy expanded 8.9 percent in the three months ended Dec. 31 from a year earlier, the statistics bureau said. Economists in a Bloomberg survey forecast an 8.7 percent gain.
Australia’s dollar climbed versus all but one of its 16 major counterparts tracked by Bloomberg on prospects demand for commodities will be sustained in China, the country’s biggest export market.
The so-called Aussie climbed 1 percent to $1.0414 and reached $1.0450, the strongest since Nov. 1. The South African rand gained 0.9 percent, to 8.0350 per dollar.
Dollar Index
The Stoxx Europe 600 Index (SXXP) rose 0.7 percent, and futures on the Standard & Poor’s 500 Index gained 0.8 percent.
Today’s GDP report “certainly allays fears that China is going to see a hard landing and that is generally seen as a positive for the world,” said Jonathan Cavanagh, a currency strategist at Westpac Banking Corp. in Singapore. “It’s hard to get too downbeat in the near term” about the Australian dollar.
The Federal Reserve Bank of New York’s general economic index rose to 11 this month, the highest since May, according to economist projections before the data. Readings higher than zero in the so-called Empire State Index signal expansion.
The Dollar Index (DXY), which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, fell 0.6 percent to 80.96 after dropping as much as 0.9 percent to 80.777, the biggest drop in two weeks.
To contact the reporters on this story: Emma Charlton in London at echarlton1@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
