BLBG:Euro Near Week-High on Improving Economy; Aussie Up on Rate Bets
The euro was 0.4 percent from a one-week high against its U.S. peer before German data this week that analysts predict may show the currency bloc’s largest economy is gaining momentum.
Germany’s producer prices probably rose in July, while surveys of purchasing managers in manufacturing and services industries showed activity picked up this month in the nation and in the euro region, according to economists polled by Bloomberg News. The yen fell earlier on data showing Japan’s trade deficit widened in July. Australia’s dollar climbed amid speculation minutes tomorrow of the Reserve Bank’s last meeting will signal no hurry to reduce interest rates further.
“We’re seeing some pretty clear signs that the euro zone has recovered from recession,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “This week’s European flash PMI will certainly see that recovery trend shine through,” Jones said, adding that BNZ estimates the euro will trade at $1.28 by year-end.
The euro bought $1.3324 as of 1:28 p.m. in Tokyo from $1.3329 at the end of last week, when it touched $1.3380, the strongest level since Aug. 9. The currency was little changed at 130.01 yen. The dollar added 0.1 percent to 97.58 yen, after earlier strengthening as much as 0.3 percent.
Producer prices rose 0.2 percent in July from June, the first increase in six months, the German Federal Statistics Office is forecast to say tomorrow.
German PMIs
A gauge of German manufacturing gained to 51.1 this month from 50.7 in July and the services index rose to 51.7 from 51.3, an Aug. 22 report from London-based Markit Economics may show according to a separate Bloomberg poll of economists. An index of activity for both industries in the euro zone rose to 50.9 from 50.5, another Bloomberg survey predicts. A reading above 50 indicates expansion.
The euro has gained 5 percent this year, the biggest advance among the 10 developed-nation currencies tracked by Bloomberg Correlation Weighted Indexes. The dollar is up 3.9 percent while the yen has weakened 8.9 percent.
Speculators have increased bullish bets on the euro, according to data from the Washington-based Commodity Futures Trading Commission. The difference in the number of wagers by hedge funds and other large speculators on a gain in the currency compared with those on a decline -- so-called net longs -- was 16,057 on Aug. 13, compared with 6,061 a week earlier and the most since the period through June 25.
Less Short
Net short positions on the yen decreased to 74,462 over the same period, the least since July 2, the figures show.
Japan’s imports outpaced exports by 1.02 trillion yen ($10.4 billion) in July, compared with the median estimate for a 773.5 billion yen gap, data showed today. It was the worst since January, when the deficit was a record 1.63 trillion yen.
“The trade deficit was higher than expected,” said Callum Henderson, the global head of currency research at Standard Chartered Plc in Singapore. “Japan’s external balance remains deeply in deficit and that’s obviously a yen negative.”
The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 major peers, added 0.1 percent to 1,022.57 after climbing 0.5 percent last week.
Minutes of the Federal Reserve’s July 30-31 meeting will be released on Aug. 21. Investors and analysts will be looking for clues on when central bankers plan to trim the $85 billion in monthly asset purchases. Officials will probably begin to reduce the central bank’s bond buying next month, according to 65 percent of economists surveyed by Bloomberg from Aug. 9-13.
Dollar Positive
“What the Fed has been trying to convince investors is that we are going to see low interest rates for a very long time, because they’re trying to prevent a sharper rise in terms of U.S. yields,” Todd Elmer, a foreign-exchange strategist at Citigroup Inc. in Singapore, said in a Bloomberg Television interview today. “As we continue to see an underlying pickup, that’s going to be positive for yields. It’s probably going to be positive for equities, and we expect that it will be positive for the U.S. dollar.”
The yield on benchmark 10-year U.S. Treasuries touched 2.87 percent, the highest since July 2011.
Australia’s dollar rose 0.3 percent to 92.15 U.S. cents.
The Reserve Bank of Australia cut its benchmark rate to a record 2.5 percent on Aug. 6. In the statement announcing the move, policy makers changed the wording when discussing whether the inflation outlook provided scope for further easing, damping expectations for additional cuts.
“It was very helpful for the Aussie that the RBA sounded more neutral in August,” Sean Callow, a senior currency strategist at Westpac Banking Corp. (WBC) in Sydney, said of the central bank’s statement earlier this month.
Traders see 56 percent odds that the RBA will cut borrowing costs again this year, interest-rate swaps data compiled by Bloomberg show.
To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
