BLBG:Euro Rises From Three-Month Low on ECB Bets, Spanish Bond Sale
The euro rose from the lowest level in almost three months against the dollar on speculation the currency is poised to rally if the European Central Bank refrains from cutting interest rates today.
The common currency advanced versus all except two of its 16 major counterparts after Spain exceeded its target at a debt sale and Standard & Poor’s raised Portugal’s credit-rating outlook. The pound fell to the weakest since July 2010 against the dollar before the Bank of England announces whether it will boost asset purchases to spur growth. Sweden’s krona rose to the strongest against the euro since August after the central bank governor said its level is “not in any way remarkable.”
“Before central bank meetings, there is often a lot of re- positioning,” said Ned Rumpeltin, the head of group of 10 currency strategy at Standard Chartered Plc in London. “The euro is having a pretty good day and the pound is under some pressure. The ECB hasn’t prepared the market in any obvious way for a rate cut.”
The euro rose 0.5 percent to $1.3026 at 10:41 a.m. London time after falling to $1.2965 yesterday, the lowest level since Dec. 11. The single currency gained 0.5 percent to 122.62 yen after rising 0.2 percent yesterday. Japan’s currency fell 0.1 percent to 94.15 per dollar.
The ECB will keep its benchmark rate at a record low of 0.75 percent, according to 56 of 61 economists surveyed by Bloomberg News. Five predict a reduction to 0.5 percent. The ECB announces its decision at 1:45 p.m. in Frankfurt and Presdient Mario Draghi holds a press conference 45 minutes later.
‘Consensus View’
“While no change is the consensus view, the currency markets seem to have been pricing in a cut” from the ECB, said Kasper Kirkegaard, a currency strategist at Danske Bank A/S (DANSKE) in Copenhagen. “If that doesn’t happen and Draghi doesn’t give an indication that there was a discussion of a cut, the euro” may extend gains, he said.
The euro extended gains after Spain sold 5.03 billion euros of bonds at an auction in Madrid today, surpassing its maximum target of 5 billion euros. The Treasury auctioned 10-year bonds at an average yield of 4.917 percent, down from 5.20 percent at the previous sale of the maturity on Feb. 21.
Portuguese bonds rose as S&P raised the nation’s credit- rating outlook to stable from negative saying European institutions will probably extend support to the government. The company affirmed the country’s BB long-term rating in a statement released today.
Helping Sentiment
“The key really is that S&P is leading the other two ratings agencies with this move, so that, at the margin, helps with euro sentiment,” said Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong.
The euro has appreciated 1.4 percent this year according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The dollar gained 2.8 percent and the pound tumbled 6 percent.
The pound weakened for a third day against the euro after the Financial Times said Chancellor of the Exchequer George Osborne is considering giving the central bank more time to bring inflation back to its 2 percent target.
The Monetary Policy Committee will hold its asset-purchase target at 375 billion pounds ($562 billion), according to the median estimate of 39 economists in a Bloomberg News survey. The rest predict an expansion.
Monetary Easing
“The only thing we’ve really got left is easing monetary policy,” said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. in London. “Whether that is today or in April, I think we’ve got a pretty good idea of the way that this going to work. I don’t find it surprising that sterling is under pressure.”
The pound fell 0.2 percent to $1.4994 after dropping to $1.4967, the weakest since July 2010. Sterling depreciated 0.6 percent to 86.90 pence per euro.
The krona appreciated at least 0.3 percent versus all 16 of its major counterparts after Riksbank Governor Stefan Ingves told Swedish lawmakers that currency was “about” the level it ought to be.
The krona gained 0.4 percent to 8.2976 per euro after climbing to 8.2951, the strongest level since Aug. 28.
The yen dropped for a second day against the euro even after the Bank of Japan (8301) rejected a call for an immediate start to open-ended asset purchases in Governor Masaaki Shirakawa’s final meeting before he is replaced by Haruhiko Kuroda.
The board voted eight-to-one against the proposal by member Sayuri Shirai, the BOJ said in Tokyo. Policy makers left an asset-purchase fund unchanged at 76 trillion yen as forecast by all 23 economists in a Bloomberg News survey.
“It’s becoming clear that powerful monetary easing by the BOJ under Kuroda would support yen weakness,” Yunosuke Ikeda, head of foreign-exchange strategy at Nomura Securities Co. in Tokyo, wrote in a report today. “Overseas expectations for Abenomics is high.”
To contact the reporter on this story: David Goodman in London at dgoodman28@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
