BLBG:Euro Rises From 22-Month Low On Monti’s Greece Comments
The euro rose from a 22-month low against the dollar after Italian Prime Minister Mario Monti said Greece will probably stay in the euro, and Germany can be persuaded to support Europe’s “common good.”
The 17-nation currency appreciated for the first time in four days against the yen amid speculation its recent slide was too fast. The gains trimmed declines of about 5 percent versus the dollar and the yen this month as a Greek opinion poll showed an anti-bailout party gaining support before June 17 elections. Sweden’s krona climbed as demand for higher yields boosted stocks. The Dollar Index fell from the most in 20 months.
“Noone really wants to be caught out if policy makers decide to do something,” said Jane Foley, a senior currency strategist at Rabobank International in London. “The euro has come a long way down and the market is extremely short,” she said, referring to bets the currency will weaken.
The euro appreciated 0.4 percent to $1.2582 at 11:10 a.m. London time. It fell to $1.2516 yesterday, the least since July 6, 2010. It was 0.3 percent stronger at 100.09 yen. The yen was little changed at 79.54 per dollar. The Stoxx Europe 600 Index of shares added 0.2 percent.
Europe’s shared currency was 1.5 percent lower this week, taking its decline this month to 5 percent. It’s down 0.9 percent versus the yen in the past five days, leaving it down 5.3 percent in May.
‘Anything Can Happen’
“Europe can have euro bonds soon,” Monti said in an interview on Italian television station La7 yesterday. Germany has an interest in ensuring no country leaves the euro, while Greece will probably remain in the 17-nation currency region even as “anything can happen,” he said in the interview.
The Dollar Index (DXY), which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, declined 0.2 percent to 82.092, after climbing as high as 82.411, the most since September 2010.
The euro has lost 4.8 percent in the past 12 months, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The declines occurred amid investor concern that European leaders were failing to contain the debt crisis. The yen has risen 9.3 percent in the period, the most according to the indexes, while the dollar rose 7.5 percent as traders favored them as havens from the turmoil.
The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain -- so-called net shorts -- rose to a record 173,869 on May 15, from net shorts of 143,984 a week earlier, data from the Commodity Futures Trading Commission showed.
Yen Haven
The yen has been bought as a safe asset amid concerns about the euro, according to Japan’s Finance Minister Jun Azumi. Greek elections on June 17 are a focus, he told reporters today.
Euro-area finance ministers and leaders don’t plan to meet again until after the Greek election next month, which may determine the fate of the currency bloc. The June ballot was called after a May 6 vote left no party able to form a government, with voters sending the anti-bailout Syriza party to second place.
“There’s been no broad agreement on measures to stem the crisis and so markets will remain nervous and we continue to look to sell the euro into risk-rallies,” said Sara Yates, a foreign-exchange strategist at Barclays Plc in London. “The euro has fallen a long way but we haven’t seen anything to change the sentiment in the market yet.”
Barclays forecasts the common European currency will depreciate to $1.20 within a year, Yates said.
‘Situation Detrimental’
“The overriding technical situation remains detrimental,” Ralf Umlauf, an analyst at Helaba Landesbank Hessen-Thueringen in Frankfurt, wrote in a note to investors. “Only the oversold market situation suggests scope for temporary recoveries given the record-high short positions.”
The euro will probably trade in a range from $1.2469 to $1.2620, he wrote.
Sweden’s krona and Australia’s dollar advanced against the dollar as a decline in volatility, or price swings, underpinned demand for higher-yielding assets.
The krona strengthened 0.6 percent to 7.1472 per dollar, while the so-called Aussie rose 0.2 percent to 97.80 U.S. cents.
The implied volatility of three-month options on Group of Seven nations’ currencies slid for a second day, according to a JPMorgan Chase & Co. measure. The gauge fell to 11.10 percent, after reaching 11.59 percent on May 18, the most since Jan. 6.
Lower volatility makes investments in currencies with higher benchmark lending rates more attractive because the risk in such trades is that market moves will erase profits.
To contact the reporter on this story: Emma Charlton in London at echarlton1@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.
