SF: Euro Erases Losses on ECB Bond-Buying Plan; Aussie Declines
Sept. 5 (Bloomberg) -- The euro erased losses versus the dollar and the yen after two central bank officials said European Central Bank President Mario Draghi will announce unlimited bond buying to quell the region’s debt crisis.
The 17-nation currency climbed to a two-month high against the dollar last week amid optimism Draghi would announce additional monetary stimulus at tomorrow’s ECB meeting. Australia’s currency dropped to a seven-week low after the economy expanded less than analysts forecast. Norway’s krone fell against all its major counterparts after manufacturing contracted for a third month amid dwindling demand from Europe. Canada’s dollar weakened before the Bank of Canada announces interest rates.
“The euro has seen a nice pop after the comments,” said Carl Forcheski, a director on the corporate currency sales desk at Societe Generale SA in New York. “The move looks like a sugar high as we’ve been anticipating Draghi’s plan, but it heightens curiosity going into the press conference tomorrow.”
The euro rose 0.1 percent to $1.2578 at 8:15 a.m. New York time, after falling as much as 0.5 percent. It reached $1.2638 on Aug. 31, the strongest since July 2. The shared currency gained 0.2 percent to 98.72 yen. Japan’s currency was little changed at 78.46 per dollar.
Under the ECB blueprint, which may be called “Monetary Outright Transactions,” the ECB would refrain from setting a public cap on yields, according to the people, and a third official, who spoke on condition of anonymity. The plan will only focus on government bonds rather than a broader range of assets and will target short-dated maturities of up to about three years, two of the people said.
The ECB’s mandate compels it to intervene in bond markets to wrest back control of interest rates and ensure the euro’s survival, Draghi said on Sept. 3, according to a recording of his comments obtained by Bloomberg News. “All this also has to do very much with the continuing existence of the euro,” he told lawmakers during a closed-door session of the European Parliament in Brussels.
--With assistance from David Goodman in London and with assistance from Jana Randow and Jeff Black in Frankfurt. Editors: Paul Cox, Dave Liedtka
To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
