BLBG:Euro Advances to Seven-Week High Against Yen on Greek Debt-Talk Progress
The euro rose to a seven-week high against the yen on speculation Greece is making progress on measures needed to win international aid, boosting demand for the shared currency.
The euro touched its strongest level in almost two months against the dollar before Greek Prime Minister Lucas Papademos meets the heads of three political parties in Athens. The yen weakened versus all of its major peers as data showed Japan’s current-account surplus slid to a 15-year low in 2011. Australia’s dollar rose to its strongest level in six months, while its New Zealand counterpart reached to a five-month high as stock gains supported demand for higher-yielding assets.
“We are still waiting for a deal from Greece but the market continues to view Greece with a glass-half-full approach,” said Jane Foley, a senior currency strategist at Rabobank International in London. This is leading to a “better tone for the euro,” she said.
Europe’s 17-nation currency rose 0.3 percent to 102.13 yen at 10:22 a.m. London time, after earlier touching 102.45, the strongest level since Dec. 21. It was little changed at $1.3255, after reaching $1.3289, the most since Dec. 12. The yen weakened 0.4 percent to 77.04 per dollar.
Greece’s Papademos met yesterday with the so-called troika, comprising the European Commission, the European Central Bank and the International Monetary Fund, to put the final touches on terms required for a 130 billion-euro bailout.
‘Constructive Talks’
He also held “constructive” talks with Charles Dallara, managing director of the International Institute of Finance, which has negotiated the terms of a debt-swap deal with private bondholders, and Deutsche Bank AG Chairman Josef Ackermann, the IIF said in a statement.
The euro has climbed 0.3 percent in the past week, according to Bloomberg Correlation-Weighted Indexes. Still, it’s fallen 4 percent over the past three months, the worst performance among the 10 developed-nation currencies tracked by the indexes, as the region’s sovereign debt-crisis damped demand for the currency. The dollar rose 0.6 percent in the three-month period, and the yen advanced 1.7 percent.
The yen dropped today after the Finance Ministry in Tokyo said Japan’s current-account surplus shrank 44 percent in 2011 from the previous year to 9.63 trillion yen, the lowest since 1996.
“Data on Japan’s current-account balance is probably a selling catalyst for the yen” in the immediate term, said Kengo Suzuki, a foreign-exchange strategist in Tokyo at Mizuho Securities Co., a unit of Japan’s No. 3 listed bank by market value. “The narrowing surplus is seen as signifying structural change in Japan’s external trade.”
Aussie Appreciation
The MSCI Asia Pacific Index of stocks gained 1.3 percent today, set to close at a six-month high, and the Stoxx Europe 600 Index climbed 0.4 percent.
Australia’s dollar climbed 0.2 percent to $1.0826 and earlier touched $1.0844, the strongest level since Aug. 2. New Zealand’s currency also rose 0.2 percent, to 83.77 U.S. cents, after reaching 83.90 cents. That’s the highest since Sept. 5.
Higher-yielding currencies have surged in 2012 as signs global growth is accelerating boosted demand for assets that appreciate in periods of economic expansion. Currencies whose central bank’s have higher benchmark interest rates, such as the Australian and New Zealand dollars, and South Africa’s rand, have outperformed their lower-yielding peers this year, data compiled by Bloomberg shows.
The Reserve Bank of Australia kept its key interest rate at 4.25 percent yesterday, compared with a rate of near zero at the Federal Reserve. The so-called Aussie dollar has strengthened 6.1 percent against the greenback this year.
Implied Volatility
The implied volatility of three-month options of Group of Seven currencies was at 10.15 percent from 10.20 percent yesterday, according to the JPMorgan G7 Volatility Index. A decrease makes investments in currencies with higher benchmark lending rates more attractive because the risk in such trades is that market moves will erase profits. The index has dropped from 12.35 percent on Dec. 30 and reached 10.06 percent on Jan. 23, the least since March.
The franc depreciated to its weakest level in three weeks after Swiss central bank interim Chairman Thomas Jordan said yesterday the currency remains “very strong.” Policy makers can’t allow it to appreciate beyond their 1.20 francs per euro limit for the exchange rate, he said.
“Jordan was adamant that the floor would remain in place,” said Michael Sneyd, a currency strategist at BNP Paribas SA in London. This has helped weaken the franc, he said.
The currency slid 0.1 percent to 1.21070 per euro, after reaching 1.21281, the weakest rate since Jan. 18.
Thailand’s baht strengthened to a two-month high after data showed global funds purchased $146 million more Thai equities than they sold in the first two days of this week and bought a net $366 million more government debt.
The baht climbed 0.7 percent to 30.75 per dollar. It earlier touched 30.73, the strongest since Dec. 9.
To contact the reporters on this story: David Goodman in London at dgoodman28@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
