BLBG:Euro Gains Versus Yen on Prospect of Combined Rescue Fund
The dollar strengthened against the yen for the first time in four days on bets U.S. growth is gathering pace.
The Australian dollar climbed versus Japan’s currency as prospects for a recovery in the world’s largest economy supported demand for higher-yielding assets. The euro weakened against the dollar after Italian Prime Minister Mario Monti said Spain could reignite the region’s debt crisis. Economists said a U.S. report this week will show orders for durable goods increased in February.
“The U.S. economy is still relatively outperforming, which is supporting the U.S. dollar for now,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “Investor concerns appear to be rising over Spain.”
The dollar rose 0.5 percent to 82.78 yen at 6:51 a.m. New York time. It appreciated 0.2 percent to $1.3241 against the euro. The 17-nation currency was 0.3 percent stronger at 109.62 yen, after rising as much as 0.5 percent to 109.86. The Australian dollar advanced 0.6 percent to 86.70 yen.
“The market feels almost compelled to sell yen as it has been the main trend in early 2012, although that trend is now flashing reversal signals,” Hardman said.
The dollar gained before a March 28 report that’s projected to show bookings for long-lasting U.S. factory goods rose 3 percent last month, according to the median estimate of economists surveyed by Bloomberg.
Treasuries fell, with the 10-year yield rising five basis points to 2.28 percent.
‘Risks of Contagion’
The 17-nation euro weakened against most of its peers as Italy’s Monti pointed to Spain’s struggle to control its finances before a finance ministers meeting in Copenhagen starting on March 30, when officials will seek agreement to raise a 500 billion-euro ceiling on bailout funding.
“It doesn’t take much to recreate risks of contagion,” Monti said two days ago at a conference in Cernobbio, Italy. Spain “hasn’t paid enough attention to its public accounts,” he said.
The Munich-based Ifo institute’s German business climate index, based on a survey of 7,000 executives, rose to 109.8 from a revised 109.7 in February. Economists forecast it would remain unchanged at the initial February reading of 109.6, according to the median of 44 estimates in a Bloomberg survey.
“It’s possible to see euro pick up slightly as people work out the implications of the bailout package and better economic statistics,” said Hans Kunnen, chief economist at St. George Bank Ltd. in Sydney. “Sentiment toward Europe is slowly improving.”
Dollar Gains
The euro climbed 0.4 percent in the past week, according to Bloomberg Correlation Weighted Indexes that track 10 developed- market currencies. The yen has strengthened 1.1 percent over the period, while the dollar gained 0.4 percent.
The U.S. currency’s advance against the yen may be limited after its decline below the 20-day moving average last week signaled a reversal of the bullish trend, according to Gaitame.com Research Institute Ltd.
The dollar depreciated to 81.98 yen on March 23, breaching the moving average for the first time since Feb. 8, said Takuya Kawabata, a Tokyo-based researcher at Gaitame.com, a unit of Japan’s largest currency-margin company. A close below that average, which is at 82.30 today, may signal a “downward correction” for the dollar, he said.
Yen Bets
Futures traders cut bets the yen will decline against the dollar, figures from the Washington-based Commodity Futures Trading Commission showed. The difference in the number of wagers by hedge funds and other large speculators on a fall in the yen compared with those on a gain was 25,821 on March 20, compared with so-called net shorts of 42,380 a week earlier.
Foreign-exchange traders, faced with lower volatility and record-low interest rates in the U.S., Europe, the U.K. and Japan, are searching for returns as far afield as Kazakhstan and Nigeria. The JPMorgan G7 Volatility Index (JPMVXYG7) has fallen to 10.14 percent from 12.37 percent in January, reducing money managers’ ability to exploit price moves.
Investec Asset Management Ltd., which trades currencies of nations from Colombia to Uganda, said demand for assets in so- called frontier markets increased in the past six months. The Cambridge Strategy (Asset Management) Ltd. invested in the Nigerian naira from December to February. Money manager Adrian Lee & Partners will add positions in six currencies, including Kazakhstan’s tenge and the Kenyan shilling by the end of the second quarter.
To contact the reporter on this story: Keith Jenkins in London at kjenkins3@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
