BLBG:Euro Rises for Sixth Day Versus Yen Before ECB; Volatility Wanes
The euro strengthened for a sixth day against the yen, the longest run of gains since March, before European Central Bank policy makers meet to discuss ways to contain the region’s debt crisis.
The common currency appreciated against all but one of 16 major counterparts on speculation ECB President Mario Draghi will provide more detail of the bond-purchase program announced last month. The yen dropped to a two-week low versus the dollar as the Bank of Japan started a two-day meeting after expanding stimulus last month. Currency price swings as measured by the JPMorgan G7 Volatility Index declined to the lowest level in almost five years.
“There are some hopes that we might get some clarification on what the ECB means by the conditionality in its bond-purchase program,” said Lutz Karpowitz, a senior foreign-exchange strategist at Commerzbank AG in Frankfurt. “It might end up in disappointment. This recovery we see in the euro might be not very long lasting.”
The euro climbed 0.3 percent to 101.63 yen at 10:06 a.m. in London after rising to 101.82, the strongest since Sept. 24. The common currency advanced 0.3 percent to $1.2939. Japan’s currency was little changed at 78.55 per dollar after falling to 78.72, the weakest since Sept. 19.
Karpowitz forecasts the euro will end the year around $1.23, even if Spain requests financial support, as “it will turn out that the bond purchases are not the game changer that a lot of market participants think they are.”
Lower Volatility
Price swings in major currencies waned before the central banks in Europe and the U.K. also hold policy meetings. The JPMorgan G7 Volatility Index dropped 0.04 percentage point to 7.72 percent, the lowest level since October 2007.
Australia’s dollar dropped to a four-week low versus the greenback after a report showed retail sales grew more slowly than economists estimated.
“We’ve been seeing a string of relatively weak data from Australia,” said Thomas Harr, head of Asia local markets strategy at Standard Chartered Plc Singapore. “The risk for the Aussie is still to the downside.”
The so-called Aussie weakened 0.1 percent to $1.0205 after falling to $1.0182, the lowest level since Sept. 6.
To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
