BLBG:Euro Remains Lower on Prospects Draghi to Signal Stimulus
The euro remained lower following a three-day decline on bets that European Central Bank President Mario Draghi will hint at further stimulus measures to counter the region’s debt crisis after today’s policy meeting.
The 17-nation currency was 0.2 percent from a two-week low versus the yen before Spain auctions debt. The dollar strengthened against most of its 16 major peers on demand for an investment haven. New Zealand’s currency touched the weakest in three months after data showed the nation’s unemployment rate rose to the highest level since 2010.
“There’s a very good chance that ECB President Draghi is going to be very dovish,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia. “There’s potential there that demand for Spanish bonds is quite weak and that would, I expect, push the euro down as well.”
The euro was at $1.3141 as of 6:47 a.m. in London after sliding 0.6 percent to $1.3158 in New York yesterday. It fell 0.1 percent to 105.40 yen after touching 105.13 yesterday, the least since April 16. The dollar was 0.1 percent higher at 80.21 yen. Japan’s markets are shut today and tomorrow for public holidays.
The ECB will keep its benchmark interest rate at a record low 1 percent today, according to all economists surveyed by Bloomberg News. Draghi said on April 25 that inflation will slow next year and risks to the economic outlook remain on the downside. That’s a contrast to the “upside risks” to inflation he warned of three weeks ago.
Spanish Yields
Spain will auction three- and five-year notes today amid speculation that the euro area’s fourth-largest economy will follow Greece, Ireland and Portugal in seeking a bailout. The three-year rate was 4.08 percent yesterday, down from a decade high of 6.37 percent in November. Spain’s borrowing costs have been contained after the ECB conducted a three-year loan program, known as the longer-term refinancing operations.
“The ECB’s LTROs had a major impact when they were first announced in December last year, but the same trick will be hard to pull off again,” Julian Jessop, London-based chief global economist at Capital Economics Ltd., wrote in a note today.
Europe’s common currency dropped yesterday as Markit Economics said its gauge for the region’s manufacturing was below 50 for a ninth month in April, a level that indicates contraction. The jobless rate in the currency bloc was at a 15- year high of 10.9 percent in March, a report from the European Union statistics office showed.
The euro has lost 6.9 percent over the past 12 months, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar climbed 6 percent, and the yen strengthened 5.4 percent.
U.S. Jobs
U.S. private employment increased by 119,000 workers last month, the smallest gain in seven months, ADP Employer Services said yesterday. The Labor Department will report May 4 that U.S. nonfarm payrolls added 160,000 jobs in April, up from 120,000 the previous month, economist estimates compiled by Bloomberg show. The unemployment rate will probably remain unchanged at 8.2 percent.
“I still think the U.S. dollar will continue to rise, even though some of the U.S. data might weaken a little bit,” said Commonwealth Bank’s Capurso. “It’s still a lot better than what is happening in the euro zone.”
New Zealand’s dollar, known as the kiwi, dropped to 80.41 U.S. cents, the least since January, before trading at 80.64, 0.5 percent below yesterday’s close. The nation’s jobless rate rose to 6.7 percent in the first quarter, Statistics New Zealand said today. That was higher than the most-pessimistic forecast in a Bloomberg survey of economists and up from 6.4 percent in the last three months of 2011.
Australia’s Dollar
“The overall unemployment headline number is worse,” said Tim Kelleher, Auckland-based head of institutional foreign- exchange sales at ASB Institutional, a unit of Commonwealth Bank of Australia. (CBA) “The kiwi didn’t like the data.”
New Zealand Finance Minister Bill English said today a stronger currency makes it harder for exporters.
The Australian dollar may remain “largely neutral” with the nearest ceiling at its 200-day moving average, analysts led by Selena Ling at Oversea-Chinese Banking Corp. in Singapore, wrote in a research note today. A decline toward $1.02 may see support materializing, they wrote. The 200-day moving average was at $1.0351, and the currency hasn’t fallen below $1.02 since Jan. 9, according to Bloomberg data.
The so-called Aussie declined 0.3 percent to $1.0303 today.
To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net.
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.
