BLBG:Euro Rises From 7-Week Low as Italian, Spanish Bonds Trim Losses
The euro rose, climbing from a seven-week low against the dollar, after Italian and Spanish bonds trimmed losses on waning concern that inconclusive Italian elections will deepen Europe’s debt crisis.
The common currency strengthened versus 12 of its 16 major counterparts amid speculation its 1 percent slide against the dollar yesterday was excessive. The yen weakened on speculation Japan’s Prime Minister Shinzo Abe will select Haruhiko Kuroda, an opponent of deflation, as the next central bank governor, paving the way for the currency to extend this year’s decline.
“The euro is going to be volatile and jittery,” said Peter Rosenstreich, chief currency analyst at Swissquote Bank SA in Geneva. “The market is digesting the political situation in Italy and its potential longer-term ramification.”
The euro gained 0.2 percent to $1.3086 at 10:42 a.m. London time after dropping to $1.3018, the weakest level since Jan. 7. The single currency advanced 0.4 percent to 120.35 yen. Japan’s currency weakened 0.2 percent to 91.96 per dollar.
The yield on Italian 10-year bonds was 33 basis points higher at 4.80 percent after increasing as much as 44 basis points. Similar-maturity Spanish yields trimmed their increase to 16 basis points from as much as 43 basis points. A basis point is 0.01 percentage point.
Italy’s pre-election favorite Pier Luigi Bersani won the lower house by less than a half a percentage point. Silvio Berlusconi, the former premier fighting a tax-fraud conviction, won a blocking minority in the Senate. Bersani ran on a pledge to maintain budget rigor, while Berlusconi campaigned for a reversal of austerity.
‘Euro Buyer’
“We’re hearing of a big euro buyer in the market and therefore the rebound in the currency doesn’t appear to be linked with a news event,” said Jane Foley, a senior currency strategist at Rabobank International in London. “I would still argue that the Italian election result should keep the euro on the defensive in the near-term.”
The euro has fallen 0.9 percent in the past week among 10 developed-nation currencies tracked by Bloomberg Correlation- Weighted Indexes. The declines trimmed its gains this year to 1.4 percent.
The yen has tumbled 16 percent over the past six months, the indexes show, as Abe became prime minister with a pledge to weaken the currency and spur economic growth, the Bloomberg indexes show.
Abe is likely to nominateKuroda as governor for the Bank of Japan (8301), and Kikuo Iwata and Hiroshi Nakaso for deputy roles, according to two officials with knowledge of the discussions. The opposition Democratic Party of Japan is ready to approve Abe’s nominations, the Nikkei newspaper reported today. The current governor and his deputies will step down on March 19.
Kuroda said in a Feb. 11 interview that he favors additional stimulus this year, and the central bank has “really substantial room for monetary easing.”
To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net Kevin Buckland in Tokyo at kbuckland1@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
