BLBG:Euro Rises to Two-Month High Versus Yen as China Pledges Debt Crisis Help
The euro rose to its highest level in two months against the yen after the People’s Bank of China said the nation will participate in resolving Europe’s debt crisis, boosting demand for higher-yielding assets.
The 17-nation euro also gained against the dollar after PBOC Governor Zhou Xiaochuan said China can provide help via avenues including the central bank and its sovereign wealth fund. The yen dropped versus all of its major peers after new easing steps by the Bank of Japan yesterday added to signs officials are acting to protect the domestic economy from currency strength. The dollar declined as Asian stocks rose.
Zhou’s comments are “what’s prompting this bid in risk assets,” said Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong. “An element of short-covering on the back of these comments was to be expected, but I wouldn’t expect it to run indefinitely,” she said, speaking of the euro. A short position is a bet that an asset will decline in value.
The 17-nation euro rose 0.4 percent to 103.42 yen at 2:08 p.m. in Tokyo and earlier touched 103.47, the most since Dec. 12. The euro rose 0.3 percent to $1.3173. The dollar bought 78.52 yen from 78.44 yesterday after reaching 78.66 yen, the most since Nov. 1.
The MSCI Asia Pacific Index of shares rose 1.7 percent, poised for the largest daily gain since Jan. 17.
Chinese Help
China and other major emerging-market countries are very positive toward helping resolve Europe’s debt crisis, Zhou said in Beijing today. China can use three avenues to help: the central bank, China Investment Corp., the nation’s sovereign wealth fund, and banks including the China Development Bank, Export-Import Bank and other institutions, he said.
Gains in the euro were limited before European finance ministers discuss a second bailout for Greece in a teleconference scheduled after they canceled a meeting planned for today. Finance ministers will meet on Feb. 20, Luxembourg Prime Minister Jean-Claude Juncker said yesterday.
“Markets are going to remain hesitant into that new finance ministers’ meeting” on Feb. 20, said Emma Lawson, a currency strategist at National Australia Bank Ltd. in Sydney.
European officials are increasing pressure on Greece to deliver budget cuts and win a second bailout package worth 130 billion euros ($171 billion) along with roughly 100 billion euros of debt relief from private bondholders.
Written Commitments
“I did not yet receive the required political assurances from the leaders of the Greek coalition parties on the implementation of the program,” Juncker, who is chairman of the euro finance panel, said in a statement yesterday. He also pressed for “further technical work” on Greek budget cuts.
The leaders of Greece’s two biggest political parties, New Democracy’s Antonis Samaras and Pasok’s George Papandreou, will send written commitments today to the so-called troika to stand by austerity measures, a government official said. The assurance to the troika -- the International Monetary Fund, European Commission and European Central Bank -- was a condition of international aid.
The euro has lost 4.8 percent in the past six months, the second-worst performance after the Swiss franc among the 10 developed-nation currencies tracked by Bloomberg Correlation- Weighted Indexes. The dollar gained 5.1 percent and the yen rose 0.9 percent over the same period.
BOJ Easing
The yen weakened for a second day versus the dollar after the Bank of Japan yesterday unexpectedly added 10 trillion yen ($127 billion) to an asset-purchase program and set a 1 percent goal for inflation to boost the economy. The central bank kept the overnight lending rate at between zero and 0.1 percent.
The Japanese currency reached its lowest level against the dollar since Nov. 1, when Japan was in the midst of conducting 1.02 trillion yen worth of unannounced intervention. The Finance Ministry released data last week showing Japan sold yen in the currency market during the first four days of November, after selling a record 8.07 trillion yen on Oct. 31, when the yen climbed to a post-World War II high of 75.35 against the dollar.
“The BOJ has provided a lot of liquidity into the global market with the expansion of their asset-purchase program so near-term we can expect dollar-yen to drift higher,” said Khoon Goh, a senior currency strategist in Singapore at Australia & New Zealand Banking Group Ltd. The actions are “on top of ongoing comments from the Japanese finance minister and the fact that the Japanese have been intervening quietly.”
Japanese Finance Minister Jun Azumi has repeatedly said he is willing to act on excessive and speculative currency moves.
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: Rocky Swift at rswift5@bloomberg.net
