BLBG: Euro Reaches Highest This Month on Asian Stocks, German Accord
The euro touched its highest level this month as Asian stocks pared losses and lawmakers in Germany, the 17-nation region’s biggest economy, reached a coalition accord on wages and spending increases.
The Bloomberg U.S. Dollar Index held a loss from yesterday before figures that may show jobless claims increased and durable goods orders fell, while U.S. consumer sentiment improved, signaling a mixed recovery that may keep the Federal Reserve from reducing stimulus this year. The euro strengthened versus most of its 16 major counterparts amid speculation a report this week will show a pick up in inflation, reducing the need for the European Central Bank to expand monetary easing.
“The euro was boosted by the news that Germany is close to reaching a coalition accord and after the currency broke above key psychological level,” said Shinichiro Kadota, a foreign-exchange strategist at Barclays Plc in Tokyo. “I don’t think euro will extend gains much from here.”
The euro bought $1.3583 at 6:50 a.m. in London after climbing to $1.3599, the strongest since Oct. 31. It gained 0.3 percent to 137.89 yen after touching 138.16, the highest since October 2009. The dollar added 0.3 percent to 101.54 yen.
The MSCI Asia Pacific Index of shares pared its decline to 0.1 percent from as much as 0.2 percent earlier. The Shanghai Composite Index rose 0.8 percent.
German Chancellor Angela Merkel clinched a coalition agreement with the Social Democrats that calls for a national minimum wage and pledges to increase spending on pensions and infrastructure without raising taxes.
SPD Ratification
The accord reached shortly before 5 a.m. in Berlin today after 17 hours of negotiations sets Merkel on track for a third term leading the nation until 2017. The coalition isn’t a done deal yet. It still must be passed by the entire SPD, which plans a referendum among its roughly 470,000 members.
The consumer price index for the euro region probably rose 0.8 percent this month after a 0.7 percent gain in October, the smallest in almost four years, economists said before a Nov. 29 report. Data published on the same day may also show the bloc’s jobless rate remained at a record 12.2 percent last month.
Euro-area recovery is still “weak, fragile, uneven,” ECB Executive Board member Joerg Asmussen said in Berlin yesterday. He is scheduled to speak in Hamburg today.
ECB Governing Council member Ardo Hansson said in an interview in Tallinn, Estonia on Nov. 22 that the Frankfurt-based central bank’s “options on rate cuts are still not fully exhausted and there are all kinds of other measures that are still on the table.”
Fade Strength
“We look to fade EUR strength and suspect that this week’s inflation report is likely a catalyst for EUR/USD to test the lower end of its recent trading range near 1.33,” Mark McCormick, a New York-based macro strategist at Credit Agricole SA, wrote in a note to clients dated today. “The recent speeches from policy makers suggest that the ECB has plenty of policy options at its disposal.”
The Bloomberg U.S. Dollar Index, which tracks the currency against 10 major counterparts, was little changed at 1,019.41 after falling 0.2 percent to 1,018.83 yesterday. The U.S. market is closed tomorrow for the Thanksgiving holiday.
The Labor Department will probably say today jobless claims climbed to 330,000 in the week through Nov. 23, and the Commerce Department may announce that bookings for goods meant to last at least three years fell 2 percent in October, according to Bloomberg News surveys.
Consumer Confidence
A final reading of the Thomson Reuters/University of Michigan consumer sentiment index due today may show the gauge was at 73.1 this month, according to the median estimate of economists surveyed by Bloomberg. That compares with an initial figure of 72 and an October level of 73.2.
“Looking at the recent U.S. data, the economy doesn’t seem strong enough for the Fed to start tapering in December,” said Yujiro Goto, a senior currency strategist at Nomura International Plc in London. “The dollar continues to range trade as investors wait on the sidelines.”
Fed policy makers will pare the monthly pace of bond buying, which tends to debase the U.S. currency to $70 billion at their March 18-19 meeting from the current pace of $85 billion, according to the median of 32 economist estimates in a Bloomberg poll this month.
The median forecast in a Bloomberg survey of more than 50 analysts is for the dollar to drop to 100 yen by the end of 2013, compared with a predicted year-end gain to 102 as recently as Oct. 4. The dollar will probably be at $1.34 per euro by Dec. 31, a separate poll showed, weaker than the $1.26 estimate last seen in August.
The greenback has risen 2.2 percent in the past month, the best performer after the pound among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen has fallen 2.4 percent in the same period, while the euro has gained 0.4 percent.
To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net
To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net
