BLBG:Euro Rises for Fifth Day Versus Dollar as Yields Fall at Italy Bill Sale
The euro strengthened for a fifth day against the dollar after borrowing costs fell at an Italian bill sale, boosting optimism the region’s debt crisis is easing.
The 17-nation currency gained versus most of its major peers after European Union Economic and Monetary Affairs Commissioner Olli Rehn said authorities are “very close” to reaching an agreement on private-sector involvement in a Greek debt swap. The dollar fell the most in almost four weeks versus the yen on speculation the Federal Reserve is moving toward a third round of bond purchases, debasing the currency. New Zealand’s dollar rose after the nation posted a trade surplus.
“The auction confirmed an improving sentiment in the Italian bond market, which can only add to the more bullish euro sentiment,” said Audrey Childe-Freeman, global head of currency strategy at JPMorgan Private Bank in London. “Rehn also hinted that we might be closer to an agreement in Greece, which is also supportive of the currency.”
The euro advanced 0.2 percent to $1.3141 at 10:49 a.m. London time, extending this week’s gain to 1.6 percent. The yen rose 0.5 percent to 77.07 per dollar, after climbing as much as 0.7 percent, the most since Jan. 2. Japan’s currency appreciated 0.3 percent to 101.25 per euro.
Italy auctioned 182-day bills at a yield of 1.969 percent, down from 3.251 percent at a sale of similar-maturity debt on Dec. 28. The Treasury sold 8 billion euros of 182-day bills at 1.969 percent, the lowest since May and down from 3.251 percent at the previous auction on Dec. 28.
Greece Deal
The euro also gained after Rehn said Greece is poised to complete a deal with its creditors over a debt swap.
“The next three days will be very crucial,” Rehn said at the World Economic Forum in Davos, Switzerland. An agreement may come “if not today, then over the weekend,” he said.
Greece must repay 14.5 billion euros of bonds in March and an agreement that triggers as much as $3.2 billion of default insurance may be necessary unless all bondholders approve, according to Marco Buti, head of the European Commission’s economics division.
The dollar headed for a second weekly drop against the euro amid speculation the Fed is moving toward another round of bond purchases to cap borrowing costs and bring down unemployment.
After a two-day policy meeting ended on Jan. 25, Fed Chairman Ben S. Bernanke said the central bank “recognizes the hardships imposed by high and persistent unemployment in an underperforming economy, and it is prepared to provide further monetary accommodation.”
The Fed has already bought $2.3 trillion of debt in two rounds of quantitative easing known as QE1 and QE2.
‘More Dovish’
“The more dovish Fed statement has served to reinforce the downward trend in the dollar” versus the yen, said Lee Hardman, a currency strategist in London at Bank of Tokyo-Mitsubishi UFJ Ltd. “Ongoing monetary easing outside of Japan remains supportive for then yen dampening the attractiveness of overseas assets for Japanese investors.”
The Dollar Index, which tracks the U.S. currency against those of six trading partners, declined for a third day, dropping 0.2 percent to 79.209.
The U.S. economy expanded at a 3 percent annual rate last quarter after advancing 1.8 percent in the previous three months, according to a Bloomberg News survey before today’s Commerce Department report.
The dollar has weakened 2.2 this month, according to Bloomberg correlation-Weight Indexes, which track 10 developed- nation currencies. The euro fell 0.7 percent, and the yen dropped 2.4 percent.
Kiwi Gains
The New Zealand dollar extended a sixth-weekly gain as Reserve Bank Governor Alan Bollard said the economy can weather a global slowdown.
Exports exceeded imports by NZ$338 million ($278 million) in December, the statistics bureau said. Economists surveyed by Bloomberg News predicted a NZ$50 million shortfall.
“We are seeing ongoing offshore demand for kiwi dollars,” said Tim Kelleher, head of institutional foreign-exchange sales in Auckland at ASB Institutional. New Zealand’s economy is “going OK and certainly some of the individual sectors of the country are doing quite well,” he said.
The kiwi gained 0.2 percent to 82.32 U.S. cents, boosting this week’s advance to 2.1 percent.
To contact the reporters on this story: David Goodman in London at dgoodman28@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
