BLBG:Euro Rises Toward Month High Before EU Finance Meeting
The euro rose toward a one-month high on prospects European finance ministers will agree to increase rescue funds at a two-day meeting starting today.
The 17-nation euro was poised for its biggest quarterly gain versus the yen in 11 years before data forecast to show German retail sales increased. The yen strengthened against most of its 16 major peers after data showed Japanese consumer prices unexpectedly rose, reducing the case for further Bank of Japan (8301) easing. The currency touched a three-week high against the dollar amid speculation Japanese companies are repatriating overseas earnings before the fiscal year ends tomorrow.
“The euro has been on a firm footing,” said Kengo Suzuki, a foreign-exchange strategist in Tokyo at Mizuho Securities Co., a unit of Japan’s third-largest bank by market value. “Should European finance ministers agree to beef up the rescue fund, the euro may get a bit firmer.”
The euro climbed 0.4 percent to $1.3349 as of 6:39 a.m. in London, set for a third-straight weekly advance, adding 0.6 percent. It reached $1.3386 on March 27, the strongest since Feb. 29. The shared currency slipped 0.2 percent to 109.49 yen. It’s still poised for a 9.9 percent rise against the yen this quarter, the biggest gain since the final three months of 2000.
Japan’s currency added 0.5 percent to 82.02 per dollar from yesterday, after earlier touching 81.83, the strongest since March 9.
European Rescue Funds
European finance ministers will gather in Copenhagen today. A draft statement dated March 23 and obtained by Bloomberg News showed that the region’s governments are preparing for a one- year increase in the ceiling on rescue aid for indebted nations to 940 billion euros ($1.25 trillion).
German Chancellor Angela Merkel said on March 26 that her country may back plans for the European Financial Stability Facility and the European Stability Mechanism to run in parallel.
Retail sales in Germany probably rose 1.1 percent in February from the previous month, according to the median estimate of economists surveyed by Bloomberg News before the Federal Statistics Office in Wiesbaden releases its data today.
“I remain bullish on the euro,” said Noriaki Murao, managing director in New York at the Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s biggest financial group by market value. “European leaders seem to be very close to reaching an agreement on expanding their firewall. I don’t think a situation similar to what we saw in Greece, where leaders were racing against time, will suddenly break out.”
The euro has strengthened 0.5 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The yen has fallen 9.4 percent, while the dollar has weakened 2.7 percent, the two worst performances.
Yen Repatriation
Speculation that Japanese companies are buying the yen to bring home overseas earnings before the end of the fiscal year also boosted the currency.
“Yen is being bought at fiscal year-end,” said Bank of Tokyo’s Murao. “Over time, I expect the yen to strengthen toward the 75-per-dollar level.”
Japan’s consumer prices excluding fresh food climbed 0.1 percent in February from a year earlier, the statistics bureau said today in Tokyo. The median economist estimate in a Bloomberg survey was for a 0.1 percent decline. A separate report showed unemployment fell to 4.5 percent last month from 4.6 percent in January.
“Better data was one reason to fear that the BOJ wasn’t as likely to increase its supply of yen in the future,” Naomi Fink, head of Japan strategy at Jefferies Japan Ltd. in Tokyo, wrote in an e-mailed note. This is “giving markets an excuse to push the pair downward,” she wrote, referring to the dollar-yen currency pair.
Won Gains
South Korea’s won rose as the nation’s assets attracted overseas funds and after data showed factory output unexpectedly rose in February.
Global investors bought $9.6 billion more of Korean shares than they sold this quarter, the biggest net inflows since September 2009, exchange data show. Industrial output rose 0.8 percent in February, Statistics Korea said today. That compares with a 0.3 percent drop estimated by economists in Bloomberg poll.
“The won is likely to strengthen further as the economic recovery gathers pace from later in the second quarter,” said Kim Sung Soon, chief currency dealer at state-run Industrial Bank of Korea (024110) in Seoul. “Net foreign buying of stocks is also providing good support for the won.”
The won strengthened 0.4 percent to 1132.20 per dollar from yesterday after earlier touching 1130.55, the strongest since March 22.
‘Double Top’
The Australian dollar trimmed earlier gains against the greenback. It earlier rose as much as 0.3 percent to $1.0414, before trading at $1.0396. The so-called Aussie yesterday touched $1.0305, the lowest since Jan. 17.
The currency’s decline below $1.06 on March 20, following peaks of $1.0845 on Feb. 8 and $1.0856 on Feb. 29, confirmed a “double top” formation, according to Pak Lai Ng, a technical analyst at Forecast Pte. The pattern, often regarded as a bearish signal, means the Australian dollar may fall to parity with its U.S. counterpart by as early as May, Forecast said.
To contact the reporters on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net Monami Yui in Tokyo at myui1@bloomberg.net;
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
