BLBG:Euro Strengthens Against Dollar as Italy Sells Bonds; Yen Gains
The euro strengthened for the first time in three days against the dollar as Italy reached its target in a bond sale and a report showed consumer confidence in the region improved this month.
The 17-nation currency climbed after dropping to a seven- week low yesterday as Pier Luigi Bersani, whose group fell short of a senate majority in parliamentary elections this week, appealed to populist Beppe Grillo to show he’s willing to help govern. The yen rose against all 16 of its major counterparts on speculation its slide in the past six months already factors in the central bank’s plans to increase monetary easing.
“There is a little bit of upside potential for the euro from the Italian auction and the euro-zone data,” said Peter Frank, global head of foreign-exchange strategy at Banco Bilbao Vizcaya Argentaria SA in London. “The auction looks pretty good but obviously we don’t know who bought it. Italy is unresolved and without any news flow, people will sell any euro rally until there’s a reason not to.”
The euro gained 0.2 percent to $1.3087 at 10:57 a.m. in London after falling to $1.3018 yesterday, the lowest level since Jan. 7. The single currency dropped 0.1 percent to 119.98 yen. The yen gained 0.3 percent to 91.68 per dollar after sliding to 94.77 on Feb. 25, the weakest since May 2010.
Italian 10-year bonds advanced after the Rome-based Treasury sold 4 billion euros of new 10-year securities and 2.5 billion euros of five-year notes, meeting its target. It sold the 10-year securities at an average yield of 4.83 percent, versus 4.17 percent at a previous auction Jan. 30.
‘Temporary Respite’
“The fact we haven’t seen a further capitulation in Italian bonds is providing some temporary respite for the euro,” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “There is still uncertainty ahead and the underlying message is the euro zone’s crisis is not over.”
An index of euro-area executive and consumer sentiment rose to 91.1 from a revised 89.5 in January, the European Commission in Brussels said. Economists had forecast an increase to 89.9, according to a Bloomberg News survey.
New Italian elections may be necessary if the coalition led by Democratic Party leader Bersani, who won the Chamber of Deputies by a thin margin, fails to muster a majority in the Senate. Grillo’s anti-austerity movement won more than 25 percent of the popular vote.
Japan’s currency rose as Chief Cabinet Secretary Yoshihide Suga said Prime Minister Shinzo Abe will submit his nominations for the next Bank of Japan (8301) governor and two deputies tomorrow.
The yen has tumbled 15 percent in the past six months, the worst performer of the 10 developed-nation currencies tracked by Bloomberg Correlation Weighted Indexes, as Abe signaled he will push the central bank to boost monetary stimulus that tends to weaken a currency. It gained 3.2 percent in the past week.
“The yen has room to strengthen in the short term,” said Yuji Kameoka, chief currency strategist at Daiwa Securities Co. in Tokyo. “There’s political risk overseas and expectations for Japanese monetary policy have peaked for now.”
To contact the reporter on this story: Neal Armstrong in London at narmstrong8@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
