Euro Rises Versus Dollar as Manufacturing Data Beats Estimates; Yen Gains

The euro rose against the dollar for the first time in three days as a purchasing managers’ index of manufacturing output in the region beat analysts’ estimates, adding to signs Europe’s economy is stabilizing.

The greenback fell versus 13 of its 16 most-traded peers after manufacturing in China and the U.S. also rose, damping demand for safer assets. The yen earlier appreciated against its U.S. counterpart, trading within one yen of a record high and adding to speculation Japan’s central bank may sell the currency to stem its appreciation.

“The main factor boosting the risk sentiment today is from the PMI reports globally,” said Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New York. “Markets are pricing in a more constructive outlook for global growth in 2012, so that’s the main factor behind dollar weakness and stronger risk appetite.”

The 17-nation currency climbed 0.6 percent to $1.3161 at 5 p.m. New York time. The euro rose 0.5 percent to 100.29 yen, and the dollar dropped 0.1 percent to 76.20 yen, after reaching 76.03 yen, the least since Oct. 31, when it touched a post-World War II record of 75.35.

The Standard & Poor’s 500 Index advanced 0.9 percent and the MSCI World Index of equities rose 1.4 percent.

South Africa’s rand rose the most against the dollar among the major currencies, adding 1.6 percent to 7.6884.

The euro reversed an earlier decline after Markit Economics said its manufacturing gauge based on a survey of purchasing managers in the euro region rose to 48.8 in January from 46.9 in December. That compares to a median estimate of 48.7 in a Bloomberg survey of economists. In Germany, the output gauge reached the highest in six months.

‘Surprisingly Good’

The official Chinese purchasing managers’ index increased to 50.5 from 50.3 in December, though the data may have been distorted by a weeklong holiday.

“The surprisingly good manufacturing PMI surveys out of Europe are helping risk sentiment and the euro,” said Elizabeth Gregory, a market strategist at Swissquote Bank SA in Geneva. “Expectations are everything in this environment, so any upside surprise is going to have a bigger impact.”

U.S. manufacturing expanded at the fastest pace since June. The Institute for Supply Management’s manufacturing index rose to 54.1 in January from 53.1 in December, the group said today.

Job Gains

Companies in the U.S. added 170,000 workers in January, reflecting job gains in services and at small businesses, according to a private report based on payrolls.

The increase was less than forecast and followed a revised 292,000 rise the prior month that was smaller than previously reported, the report from the Roseland, New Jersey-based ADP Employer Services showed today.

The euro appreciated 1 percent against the dollar last month as Italian and Spanish bonds outperformed their German counterparts amid speculation policy makers are bringing the region’s debt crisis under control. European economic confidence increased in January and German unemployment dropped more than economists estimated from the previous month.

In discussions late last week in Athens, bondholders negotiating a debt swap with Greece lowered their demands for an average coupon on the new 30-year securities they would receive to as little as 3.6 percent from 4.25 percent after European officials demanded they take steeper losses, people familiar with the matter said at the time.

Bear Trend

The euro’s appreciation may be short lived if it fails to break through the $1.3244-$1.3290 resistance zone, MacNeil Curry, head of foreign-exchange and interest-rates technical strategy at Bank of America Corp. in New York, wrote in a note to clients. The currency may be poised to resume its bear trend and weaken to $1.25. Resistance refers to a level where sell orders may be clustered.

The dollar and the yen are the best performers among the 10 currencies tracked by the Bloomberg Correlation-Weighted Indexes in the past six months after the euro area’s debt crisis increased demand for safer assets. The dollar gained 6 percent in the period and the yen advanced 5.7 percent, while the euro weakened 2.2 percent.

Japan may act if the yen approaches a record against the dollar, according to Naohiko Baba, Goldman Sachs Group Inc.’s chief economist in Tokyo. The authorities may attempt large- scale intervention and continue so-called stealth operations for several days, he wrote in a note today.

Swiss Franc

The nation refrained from selling yen in the market last month, the Ministry of Finance said yesterday on its website. Japan sold the currency on Oct. 31 when it climbed to the postwar record, hurting the overseas competitiveness of exporters and cutting the value of their repatriated income.

Switzerland’s franc climbed to a four-month high against the euro, approaching the Swiss National Bank’s ceiling. The franc was little changed at 1.20456 per euro after earlier appreciating to 1.20319, the strongest since Sept. 19, two weeks after the SNB imposed a 1.20 cap on the currency.

The cost to protect against a drop in the euro against the franc has increased for the past four days. Risk-reversal rates for one-month options on the currency pair had a 1.27 percentage-point premium for contracts that grant the right to sell the euro over those allowing for purchases, after touching 1.47 percentage points, the most since Sept. 19.

The risk-reversal rate “continues to reflect a rising premium for puts over calls, seemingly indicating a looming test of wills,” Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong, wrote in a note to clients.

Norwegian Krone

A call option grants the buyer the right, but not the obligation, to purchase a security, while put options confer the right to sell.

The Norwegian krone advanced against the euro after Norway’s manufacturing expanded in January for the first time since October. The krone strengthened 0.4 percent to 7.6423 per euro as the Fokus Bank index rose to 54.9 from 46.6 in December. It was forecast to rise to 48, according to a Bloomberg survey of analysts. A reading above 50 signals an expansion.

South Korea’s won dropped against all its major counterparts as exports dropped for the first time in two years and inflation decelerated. Consumer prices rose 3.4 percent in January from a year earlier, compared with 4.2 percent the month before. Exports shrank 6.6 percent, the first decline since October 2009.

The won declined 0.3 percent to 1,126.35 per dollar.

To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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