BLBG:Euro Rises to 4-Year High Versus Yen on German Deal; Baht Drops
The euro climbed to the highest level in more than four years against the yen, rising for a fifth day, as lawmakers in Germany reached a coalition accord on wages and spending increases without increasing taxes.
The shared currency gained versus all but one of its 16 major peers as the deal ended the longest period of coalition talks in Chancellor Angela Merkel’s time in office. The dollar climbed against the yen before U.S. data economists said will show a gauge of consumer sentiment was higher in November than initially estimated. The Thai baht fell after the central bank unexpectedly cut interest rates.
“Euro-yen seems to be the driver of euro-dollar at the moment,” said Ned Rumpeltin, head of Group-of-10 currency strategy at Standard Chartered Bank in London. “It’s rock solid. I don’t think anyone in the market really doubted that Germany would find a stable coalition but it just adds to the overall sense of continuity in Europe.”
The euro advanced 0.7 percent to 138.44 yen at 10:02 a.m. in London after touching 138.51, the highest since August 2009. The common currency climbed 0.2 percent to $1.3605 after climbing to $1.3613, the strongest level since Oct. 31. The dollar rose 0.5 percent to 101.76 yen.
Merkel clinched the coalition agreement with the Social Democratic Party that calls for a national minimum wage and pledges to increase spending on pensions and infrastructure.
German Coalition
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 agreement must still be passed by the entire SPD, which plans a referendum among its about 470,000 members.
“The euro was boosted by the news that Germany is close to reaching a coalition accord,” said Shinichiro Kadota, a foreign-exchange strategist at Barclays Plc in Tokyo. “I don’t think the euro will extend gains much from here.”
The dollar rose before for the fourth time in five days against the yen before today’s U.S. reports.
The Labor Department will say today jobless claims climbed to 330,000 in the week through Nov. 23, and the Commerce Department will announce that bookings for goods meant to last at least three years fell 2 percent in October, according to separate Bloomberg News surveys of economists.
A final reading of the Thomson Reuters/University of Michigan consumer sentiment index due today will show the gauge was at 73.1 this month, versus an initial figure of 72 and an October level of 73.2, a separate survey showed.
‘Range Trade’
“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.”
The Bloomberg U.S. Dollar Index, which tracks the currency against 10 major counterparts, was little changed at 1,018.55.
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 survey this month.
The dollar will weaken to 100 yen by year-end, compared with a prediction of 102 as recently as Oct. 4, analyst forecasts composed by Bloomberg show. The dollar will decline to $1.34 per euro by Dec. 31, the figures show, weaker than the $1.26 estimate in August.
Currency Indexes
The greenback has risen 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 2.8 percent in the same period, while the euro has gained 0.4 percent.
The baht fell for a seventh day versus the dollar after the Bank of Thailand cut its one-day bond repurchase rate by a quarter of a percentage point to 2.25 percent. All 19 economists in a Bloomberg News survey predicted the rate would remain unchanged.
The baht slid 0.3 percent to 32.153 per dollar after weakening 1.6 percent in the previous six days.
To contact the reporter on this story: David Goodman in London at dgoodman28@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
