The euro advanced to its highest
level versus the dollar since the region’s $1 trillion bailout
was announced May 10 on evidence the European economy is
recovering at a faster pace than the U.S.
The 16-nation currency appreciated as a report showed
European confidence in the economic outlook rose to the highest
level in more than two years this month and German unemployment
decreased. Economists say a report due tomorrow will show
slowing U.S. economic growth.
“What’s helping the euro is continued strong data,” said
John Doyle, a strategist in Washington at the currency-trading
firm Tempus Consulting Inc. “That German unemployment number as
well as the economic confidence, it’s enough to push it higher.”
The euro climbed 0.7 percent to $1.3087 at 9:24 a.m. in New
York, from $1.2995 yesterday, after reaching $1.3093, the
highest level in more than two months. The euro traded at 113.98
yen, compared with 113.66. The yen strengthened 0.4 percent to
87.10 against the dollar, from 87.47.
The shared currency is headed for a 6.8 percent monthly
rally against the dollar and a 5.3 percent gain versus the yen,
according to Bloomberg data.
An index of executive and consumer sentiment in the euro
nations increased to 101.3 this month from 99 in June, the
European Commission said today. That’s the highest level since
March 2008. The number of people out of work in Germany fell in
July for a 13th month, dropping by a seasonally adjusted 20,000
to 3.21 million, the lowest level since November 2008, the
Federal Labor Agency said.
Stress Tests
The single currency has also been supported this week as
stress tests released July 23 found only seven European banks
needed to raise capital.
The U.S. economy grew at a 2.5 percent annualized rate in
the second quarter after expanding at a 2.7 percent pace in the
first three months of the year, according to the median forecast
of 81 economists in a Bloomberg News survey. The report from the
Commerce Department is due tomorrow at 8:30 a.m. New York time.
“The U.S. economy appears to be losing momentum, and
that’s supporting the euro,” said Lee Hardman, a currency
strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London.
Initial jobless claims in the U.S. dropped by 11,000 in the
week ended July 24 from a revised 468,000, Labor Department
figures showed today in Washington. The number of people
receiving unemployment insurance rose, while those getting
extended payments declined.
Weaker Kiwi
New Zealand’s dollar fell for a second day versus the yen
after the central bank said deteriorating growth will slow the
pace of future interest-rate increases.
Reserve Bank of New Zealand Governor Alan Bollard raised
the official cash rate for a second month, increasing it by a
quarter-percentage point to 3 percent.
New Zealand’s dollar slid 0.4 percent to 63.32 yen, from
63.60. It was little changed at 72.72 U.S. cents.
The South Korean won slipped 0.2 percent to 1,186.50 per
dollar as the Bank of Korea said an index measuring
manufacturers’ expectations fell to 102 for August from 104.
The currency rose to a five-week high of 1,181.33 on July
27 before retreating yesterday as traders said the central bank
bought dollars to counter the won’s appreciation.
“Concern the recovery is slowing is bringing risk aversion
back,” said Seo Jeong Hun, chief economist at Korea Exchange
Bank in Seoul. “The possibility of intervention also exists,
but exporters may try to repatriate income, so won declines
should be limited.”
To contact the reporters on this story:
Catarina Saraiva in New York at
asaraiva5@bloomberg.net;
Keith Jenkins in London at
kjenkins3@bloomberg.net
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