BLBG:Euro Strengthens Against Dollar as Italy Sells Bonds; Yen Gains
The euro strengthened for the first time in three days against the dollar as Italy reached its target in a bond sale and a report showed economic confidence in the region improved this month.
The 17-nation currency climbed from near a seven-week low set yesterday as Pier Luigi Bersani, whose group fell short of a senate majority in Italian elections, appealed to populist Beppe Grillo to show he’s willing to help govern. The yen rose versus all its 16 major counterparts on speculation its slide in the past six months sufficiently factors in the central bank’s plans to boost stimulus. The Dollar Index (DXY) fell before Federal Reserve Chairman Ben S. Bernanke resumes testimony in Washington today.
“There is a little bit of upside potential for the euro from the Italian auction and the euro-zone data,” said Peter Frank, global head of foreign-exchange strategy at Banco Bilbao Vizcaya Argentaria SA in London. “The auction looks pretty good but obviously we don’t know who bought it. Italy is unresolved and without any news flow, people will sell any euro rally until there’s a reason not to.”
The euro gained 0.3 percent to $1.3105 at 6:40 a.m. in New York after falling to $1.3018 yesterday, the lowest level since Jan. 7. The single currency dropped 0.1 percent to 120.07 yen. The yen rose 0.4 percent to 91.64 per dollar after sliding to 94.77 on Feb. 25, the weakest since May 2010.
Italy’s 10-year bonds advanced as the Treasury sold 4 billion euros of new 10-year securities and 2.5 billion euros of five-year notes, meeting its target. It sold the 10-year debt at an average yield of 4.83 percent, versus 4.17 percent at a previous auction Jan. 30.
‘Temporary Respite’
“The fact we haven’t seen a further capitulation in Italian bonds is providing some temporary respite for the euro,” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “There is still uncertainty ahead and the underlying message is the euro zone’s crisis is not over.”
New Italian elections may be necessary if the coalition led by Democratic Party leader Bersani, who won the Chamber of Deputies by a thin margin, fails to muster a majority in the Senate. Grillo’s anti-austerity movement won more than 25 percent of the popular vote.
An index of euro-area executive and consumer sentiment rose to 91.1 from a revised 89.5 in January, the European Commission in Brussels said. Economists had forecast an increase to 89.9, according to a Bloomberg News survey.
The euro has weakened 3.5 percent against the dollar this month, snapping six months of gains.
Yen Advances
Japan’s currency rose as Chief Cabinet Secretary Yoshihide Suga said Prime Minister Shinzo Abe will submit his nominations for the next Bank of Japan (8301) governor and two deputies tomorrow.
The main opposition party, the Democratic Party of Japan, said it will back Haruhiko Kuroda as the next BOJ governor. While the DPJ signaled resistance to one anticipated deputy pick -- Kikuo Iwata, an advocate of greater government oversight of the BOJ -- two other opposition parties showed support, increasing the chance Abe gets approval for his full slate.
The yen has tumbled 15 percent in the past six months, the worst performer of the 10 developed-nation currencies tracked by Bloomberg Correlation Weighted Indexes, as Abe signaled he will push the central bank to boost monetary stimulus that tends to weaken a currency. It gained 3.3 percent in the past week.
“The yen has room to strengthen in the short term,” said Yuji Kameoka, chief currency strategist at Daiwa Securities Co. in Tokyo. “There’s political risk overseas and expectations for Japanese monetary policy have peaked for now.”
Dollar Index
The Dollar Index fell for the first time in six days before Bernanke testifies today to the House Financial Services Committee. He signaled to the Senate Banking Committee yesterday the Fed is prepared to keep buying bonds at its present pace and dismissed concerns record easing risks sparking inflation.
Bernanke has pushed back against colleagues on the Federal Open Market Committee who favor curtailing the $85 billion in monthly bond-buying.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against currencies of six U.S. trading partners, dropped 0.3 percent to 81.625 after rising to 81.948 yesterday, the highest since Aug. 22.
To contact the reporter on this story: Neal Armstrong in London at narmstrong8@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
