BLBG:Euro Rises to Two-Month High Versus Yen as China Pledges Debt Crisis Help
The euro rose to its highest level in two months against the yen after the People’s Bank of China Governor Zhou Xiaochuan said China will help resolve Europe’s debt crisis, boosting demand for higher-yielding assets.
The euro stayed higher after reports showed the German economy shrank less than forecast in the fourth quarter and France unexpectedly grew. The yen dropped versus all of its major peers after new easing steps by the Bank of Japan yesterday added to signs officials are acting to protect the domestic economy from currency strength.
Zhou’s comments are “what’s prompting this bid in risk assets,” said Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong. “An element of short-covering on the back of these comments was to be expected, but I wouldn’t expect it to run indefinitely,” she said, speaking of the euro. A short position is a bet that an asset will decline in value.
The euro rose 0.2 percent to 103.22 yen at 8:28 a.m. London time and earlier touched 103.49, the strongest since Dec. 12. The 17-nation currency advanced 0.2 percent to $1.3157. The dollar was little changed at 78.46 yen, after reaching 78.66 yen, the most since Nov. 1.
The Stoxx Europe 600 Index of shares gained 0.5 percent and the MSCI Asia Pacific Index rose 1.7 percent.
Chinese Help
China and other major emerging-market countries are very positive toward helping resolve Europe’s debt crisis, Zhou said in Beijing today. China can use three avenues to help: the central bank, China Investment Corp., the nation’s sovereign wealth fund, and banks including the China Development Bank, Export-Import Bank and other institutions, he said.
Gross domestic product in Germany, adjusted for seasonal effects, fell 0.2 percent from the third quarter, when it increased 0.6 percent, the Federal Statistics Office in Wiesbaden said today. Economists forecast a 0.3 percent decline, according to the median of 43 estimates in a Bloomberg News survey.
Third-quarter growth was revised up from 0.5 percent. The French economy, Europe’s second largest, unexpectedly grew 0.2 percent in the fourth quarter.
Gains in the euro were limited before European finance ministers discuss a second bailout for Greece in a teleconference scheduled after they canceled a meeting planned for today. Finance ministers will meet on Feb. 20, Luxembourg Prime Minister Jean-Claude Juncker said yesterday.
European officials are increasing pressure on Greece to deliver budget cuts and win a second bailout package worth 130 billion euros along with roughly 100 billion euros of debt relief from private bondholders.
Written Commitments
“I did not yet receive the required political assurances from the leaders of the Greek coalition parties on the implementation of the program,” Juncker, who is chairman of the euro finance panel, said in a statement yesterday. He also pressed for “further technical work” on Greek budget cuts.
The leaders of Greece’s two biggest political parties, New Democracy’s Antonis Samaras and Pasok’s George Papandreou, will send written commitments today to the so-called troika to stand by austerity measures, a government official said. The assurance to the troika -- the International Monetary Fund, European Commission and European Central Bank -- was a condition of international aid.
The euro has lost 4.8 percent in the past six months, the second-worst performance after the Swiss franc among the 10 developed-nation currencies tracked by Bloomberg Correlation- Weighted Indexes. The dollar gained 5 percent and the yen rose 0.9 percent over the same period.
The yen weakened for a second day versus the dollar after the Bank of Japan yesterday unexpectedly added 10 trillion yen to an asset-purchase program and set a 1 percent goal for inflation to boost the economy. The central bank kept the overnight lending rate at between zero and 0.1 percent.
To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
