Euro Near Two-Week High Against Dollar on Global Growth Signs
Euro Near Two-Week High Against Dollar
Hannelore Foerster/Bloomberg
The shared currency was near its strongest in a week against the yen.
The shared currency was near its strongest in a week against the yen. Photographer: Hannelore Foerster/Bloomberg
The euro was near a more than two- week high against the dollar before reports this week that economists say will show the recovery is gaining strength in Germany, Europe’s largest economy.
The shared currency was near its strongest in a week against the yen before data tomorrow forecast to show German factory orders expanded for a second month. The yen fell versus higher-yielding currencies as the Bank of Japan started a two- day meeting today at which policy makers may reaffirm their willingness to take more credit-easing measures. South Korea’s won rose to a four-week high after better-than-expected growth in U.S. employment boosted optimism exports will improve.
“Lower short-term U.S. yields are keeping the dollar under pressure against the euro even after some better data last week,” said Derek Halpenny, European head of currency research at Bank of Tokyo Mitsubishi UFJ Ltd. “For the dollar to come back we need to see a change in the macro story in Europe.”
The euro traded little changed at $1.2895 as of 8:55 a.m. in London after rising to $1.2919, the strongest since Aug. 18. The single currency was at 108.54 yen from 108.73 on Sept. 3, when it reached 109.56 yen, matching the high on Aug. 30. The dollar 0.2 percent weaker at 84.16 yen.
Foreign-exchange trading may be subdued today because of the U.S. Labor Day holiday.
German Growth
German factory orders rose 0.5 percent in July after gaining 3.2 percent the previous month, economists said before the Economy Ministry report. Industrial production expanded 1 percent, a separate survey showed before the Sept. 8 figures.
The European Central Bank last week raised its 2010 economic growth forecast to about 1.6 percent from its previous prediction of 1 percent, and increased its 2011 projection to 1.4 percent from about 1.2 percent.
Demand for safer assets such as the dollar and the yen waned after the U.S. Labor Department said on Sept. 3 that private payrolls climbed by 67,000 in August, after rising a revised 107,000 in July.
“We’re in for a long period of very sluggish growth in the U.S. but it should avoid recession,” said Richard Grace, chief currency strategist in Sydney at Commonwealth Bank of Australia, the nation’s largest lender. “As risk aversion trades are taken off, it will put mild downward pressure to the U.S. dollar.”
President Barack Obama will this week urge Congress to permanently extend and expand a research and development tax credit to spur job growth. Obama will lay out the proposal, which would cost about $100 billion over the next decade, in a Sept. 8 speech, according to two administration officials.
Yen Falls
The yen weakened for a fourth day against South Africa’s rand as the Bank of Japan commenced a policy meeting in Tokyo.
Central Bank Governor Masaaki Shirakawa may reiterate his willingness to take further action if last month’s decision to expand a credit program by 10 trillion yen ($118 billion) isn’t enough to support the recovery. Shirakawa said last week the BOJ stands ready to implement “appropriate action as needed.”
“Shirakawa is likely to give his interpretation of the market’s reaction to the BOJ’s recent policy initiatives and voice further concern on the yen’s strength,” said Gareth Berry, a currency strategist at UBS AG in Singapore. “Any possible suggestion from him that the BOJ is willing to consider further easing should put a bit of downward pressure on the yen.”
Governor Shirakawa and his board will likely forego fresh liquidity injections at the meeting, according to all but one of 15 economists surveyed by Bloomberg. The board will keep the benchmark rate at 0.1 percent, where it’s been since 2008, all 15 economists predicted.
Japan’s currency declined 0.1 percent to 11.70 per South African rand and 0.2 percent to 13.91 won.
Won Gains
South Korea’s currency rose for a fourth day versus the dollar as overseas investors boosted their holdings of local equities. Industrial production expanded for the 13th month in July, exports advanced for the 10th month and consumer prices rose 2.6 percent in August, reports showed last week.
“The Korean economy is connected to global demand,” said Sam Hong, a currency dealer at Shinhan Bank in Seoul. “The offshore players have sold a lot of dollars.”
The won appreciated 0.4 percent to 1,170.45 per dollar, after reaching 1,169.20, the strongest level since Aug. 10.
To contact the reporters on this story: Matthew Brown in London at mbrown42@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net;
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