BLBG:Euro Set to End Five-Week Decline After ECB Says Credit Shortage Averted
The euro was set to halt a five-week drop against the dollar as Italy prepared to sell bonds and after European Central Bank President Mario Draghi said policy makers have averted a credit shortage.
The greenback slid against 15 of its 16 major peers this week before a report that may show confidence among U.S. consumers gained, damping demand for the currency as a haven. Taiwan’s dollar was set to complete a four-week advance on speculation President Ma Ying-jeou, who has improved economic ties with China, will be re-elected tomorrow.
“The European liquidity operations are having a positive effect on risk appetite at the moment,” Chris Weston, an institutional trader at IG Markets Ltd. in Melbourne. “The bond auctions are becoming more positive and yields are declining and that’s having a positive impact on euro.”
The euro traded at $1.2819 as of 12:46 p.m. in Tokyo from $1.2814 yesterday in New York, and is poised to rise 0.8 percent this week. The 17-nation currency was little changed at 98.45 yen. The dollar fetched 76.80 yen from 76.76.
The MSCI Asia Pacific Index of shares gained 0.5 percent. The Standard & Poor’s 500 Index rose 0.2 percent yesterday.
Italy will sell bonds due in 2014 and 2018 today. The nation’s Treasury raised 12 billion euros ($15.4 billion) from a bill auction yesterday. Italy’s 10-year yield fell 35 basis points, 0.35 percentage point, to 6.63 percent.
‘Tentative Signs’
The ECB’s Draghi said the bank’s massive injection of cash into the financial system last month is beginning to lubricate seized-up credit markets. “There are tentative signs of stabilization of economic activity at low levels,” he said in Frankfurt yesterday. Policy makers held the benchmark rate at a record low of 1 percent after two straight reductions.
“The corrective move is not unrealistic, given that we’re going into a long U.S. weekend, so some people will have wanted to take off some of the positions” betting on euro declines, said Alex Sinton, a senior dealer at ANZ National Bank Ltd. in Auckland. “It’s a minor corrective move of an overall trend that’s still in place while they take measures to correct the underlying issue, which is spending more than is being earned and budget deficits of extreme proportions.”
The U.S. is closed for a public holiday on Jan. 16.
Greece’s private creditors said yesterday time for a debt- swap deal is running out after talks between financial and government representatives in Athens failed to yield an agreement to cut the country’s borrowing load.
Time Running Short
“A range of issues were discussed and some key areas remain unresolved,” the Institute of International Finance, which represents banks that hold Greek debt, said in an e-mailed statement yesterday. Discussions will continue in Athens today, “but time for reaching an agreement is running short,” it said.
The euro will target a drop to about $1.20 and possibly lower toward $1.16 this year, ANZ’s Sinton said.
Demand for the dollar was limited on speculation confidence in the world’s biggest economy will improve.
The Thomson Reuters/University of Michigan preliminary consumer confidence index for January probably gained to 71.5, the highest level in seven months, from 69.9 at the end of December, according to the median forecast of economists surveyed by Bloomberg News before the data are released today.
The U.S. economy “expanded at a modest to moderate pace” from late November through the end of December, the Federal Reserve said in its Beige Book anecdotal business survey released on Jan. 11. Policy makers at a Fed meeting this month will for the first time publish projections for the benchmark federal funds rate and will also update their forecasts for economic growth, unemployment and inflation.
The dollar has depreciated 0.5 percent in the past week, the second-worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes.
Taiwan Election
Taiwan’s dollar advanced 0.9 percent this week to NT$29.974 against its U.S. counterpart, the biggest gain in six weeks, according to Taipei Forex Inc. It rose 0.1 percent today and reached NT$29.880 yesterday, the strongest level since Nov. 1.
Tsai Ing-Wen, chairwoman of Taiwan’s opposition Democratic Progressive Party, will run against President Ma of the Kuomintang party in tomorrow’s election. Ma, seeking a second four-year term, has pledged to maintain his policy of improved relations with China. Tsai advocates a more cautious approach.
To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net
