BLBG:Euro Strengthens Second Day Before Greek Debt-Swap Deadline as Yen Slides
The euro strengthened the most in two weeks against the yen on speculation Greece will attract enough investors to make its debt-swap plan a success, adding to optimism the region’s debt crisis will be contained.
The 17-nation currency climbed for a second day against the dollar on bets the European Central Bank will refrain from cutting interest rates today and signal the region’s economy is improving. The yen fell against all of its major counterparts after Japan reported a record current-account deficit, threatening to undermine the currency’s haven status. The New Zealand and Australian dollars led gains by higher-yielding currencies as stocks rose around the world.
“We seem to be inching toward an agreement on the Greek bond restructuring,” said Paul Robson, a senior foreign- exchange strategist at Royal Bank of Scotland Group Plc in London. “That’s slightly positive for the euro and other currencies. The dollar appears to be under pressure because of the slightly firmer tone in Europe.”
The euro strengthened 1 percent to 107.65 yen at 10:48 a.m. in London after gaining as much as 1.2 percent, the most since Feb. 24. The single currency climbed 0.5 percent to $1.3213. The yen fell 0.5 percent to 81.48 per dollar after dropping to 81.87 on March 2, the weakest since May 26.
Investors with about 60 percent of the Greek bonds eligible for the nation’s debt swap have so far indicated they’ll participate, putting the country on the verge of the biggest sovereign restructuring in history.
Greek Swap
Greece’s largest banks, most of the country’s pension funds, and more than 30 European banks and insurers including BNP Paribas SA, Commerzbank AG (CBK) and Assicurazioni Generali SpA (G) have agreed to the offer. That brings the total to about 124 billion euros, based on data compiled by Bloomberg. The offer concludes at 10 p.m. Athens time today.
The ECB will keep its benchmark interest rate at a record low 1 percent today, according to the median estimate of economists in a Bloomberg News survey.
The euro appreciated 0.2 percent against the dollar and jumped 1 percent versus the yen on the day of the previous ECB meeting on Feb. 9, when ECB President Mario Draghi said surveys showed “signs of stabilization” in the region.
The euro has weakened 4.9 percent in the past year as the region’s debt crisis intensified, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The dollar gained 0.3 percent, and the yen strengthened 0.3 percent.
Yen Falls
The yen fell toward a nine-month low versus the dollar after the Ministry of Finance said Japan had a current-account deficit of 437.3 billion yen in January. That’s the biggest shortfall since comparable data began in 1985 and was more than the median estimate of a 320 billion-yen deficit in a Bloomberg News survey of economists.
“Japan’s current-account deficit exceeded expectations, fueling concerns about its economic growth and fiscal problems,” said Yuji Saito, director of the foreign-exchange department in Tokyo at Credit Agricole SA. “This is spurring selling of the yen.”
Higher-yielding currencies advanced as the Stoxx Europe 600 Index (SXXP) of shares rose 1.2 percent and futures on the Standard & Poor’s 500 Index climbed 0.8 percent.
New Zealand’s dollar appreciated 1.2 percent to 82.64 U.S. cents, the Australian dollar rose 0.6 percent to $1.0648, and the South African rand gained 0.7 percent to 7.5448 per dollar.
Benchmark interest rates are 2.5 percent in New Zealand, 4.25 percent in Australia and 5.5 percent in South Africa compare with close to zero in the U.S. and Japan, attracting investors to their higher-yielding assets.
N.Z. Rates
The Reserve Bank of New Zealand left its official cash rate on hold today. Governor Alan Bollard said the RBNZ’s forecasts “are not inconsistent with a story that would see that remaining in place for much of this year.”
China’s yuan fell before a government report tomorrow forecast to show inflation slowed to the least in 19 months. The four-day drop is its longest run of declines since Jan. 12.
The yuan declined 0.1 percent to 6.3165 per dollar, according to the China Foreign Exchange Trade System.
The Swiss franc strengthened for a second day against the dollar as a report showed consumer prices dropped for a fifth month in February.
Consumer prices declined 0.9 percent from a year ago after falling 0.8 percent in January, the Federal Statistics Office in Neuchatel said in an e-mailed statement today.
The franc appreciated 0.5 percent to 91.25 centimes per dollar, and was little changed at 1.20578 francs per euro.
The euro may rise to as high as 109.58 yen, according to Commerzbank AG, citing technical indicators.
“Euro-yen has rebounded from the six-week uptrend at 105.85,” Karen Jones, head of fixed-income, commodity and currency technical analysis at the bank in London, wrote in a report today. “The market will find resistance at 108 and will need to regain 108.75 to retarget the 55-week moving average at 109.38 and the July low at 109.58.”
To contact the reporters on this story: Keith Jenkins in London at kjenkins3@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
