BLBG:Euro Appreciates Against Yen as Services Index Rises
The euro rose toward the strongest level in more than 2 1/2 years versus the yen as a purchasing managers’ index showed services output in the region shrank less than initially estimated, boosting demand for the currency.
The 17-nation euro reversed an earlier decline as European stocks rallied after their biggest plunge in more than three months. European Central Bank policy makers are due to meet this week. Australia’s dollar weakened after the central bank said the inflation outlook allowed scope for further cuts. The yen fell against all 16 of its major peers after Bank of Japan governor Masaaki Shirakawa said he will step down earlier than previously planned.
“The final PMI readings for Europe were obviously on the stronger side of expectations, so that has provided a bit more of a boost for the euro,” said Ian Stannard, the head of European foreign-exchange strategy at Morgan Stanley in London. “The underlying trend in the euro is still up but we need to be cautious going into the ECB meeting.”
The euro rose 0.9 percent to 125.91 yen at 6:08 a.m. New York time. It touched 126.97 yen on Feb. 1, the strongest since April 2010. The shared currency strengthened 0.2 percent to $1.3545, after dropping 0.4 percent to $1.3459, the lowest since Jan. 29. The yen slid 0.7 percent to 92.98 per dollar.
An index based on a survey of purchasing managers in the services industry rose to 48.6 from 47.8 in December, London- based Markit Economics said in a report today. That’s above an initial estimate of 48.3 published on Jan. 24. A reading below 50 indicates contraction.
Yen Slides
The yen slid after Shirakawa told reporters in Tokyo that he would leave at the same time as two deputy governors on March 19. He was scheduled to step down on April 8.
The yen has dropped 7.7 percent since Dec. 31, according to Bloomberg Correlation-Weighted Indexes which track 10 developed- nation currencies, fueled by speculation the central bank will increase monetary stimulus that debases the currency. The euro has gained 2.7 percent and the dollar is down 0.3 percent.
Australia’s dollar slid after the Reserve Bank of Australia kept its benchmark interest rate unchanged at the half-century low of 3 percent.
“Aussie selling pressure stems from the comments that the RBA made that the inflation outlook gives scope for further easing,” said Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong. “The market has taken that to mean the RBA is sitting ready to ease.”
RBC expects the next interest-rate cut to come in the second quarter, according to Trinh. The so-called Aussie fell 0.5 percent to $1.0385.
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.
