The euro strengthened against most of its major counterparts after Spain, Italy and the Netherlands sold bonds, damping concern the region’s sovereign-debt crisis is worsening.
Australia’s dollar dropped after a government report showed consumer prices rose at the slowest pace since 2009. Currencies of most other commodities-exporting nations, led by South Africa’s rand, gained versus the dollar as stocks and commodities advanced following data that pointed to a stabilizing U.S. housing market. Hungary’s forint climbed before a decision tomorrow on whether bailout talks will proceed.
“You’re seeing a little bit of optimism,” said Kathy Lien, director of currency research at the online trading firm GFT Forex in New York. “We had those bond auctions from Italy and Spain, so that’s helped relieve some of the stress on peripheral yields, and that’s helping some of the higher- yielding currencies rebound.”
The Standard & Poor’s 500 Index (SPX) advanced as much as 0.6 percent before trimming the gain to 0.4 percent, and the Thomson Reuters/Jefferies CRB Index of raw materials added 0.3 percent.
Spain’s bonds gained, pushing yields on two-year notes down 14 basis points, or 0.14 percentage point, to 3.43 percent after the nation sold 1.9 billion euros ($2.5 billion) of bills. The maximum target was 2 billion euros. Two-year Dutch note yields fell the most in almost five months as the Netherlands sold securities due in 2014 and 2037. Italy’s yields dropped after the nation sold 2.5 billion euros of zero-coupon notes.
Dutch Prime Minister Mark Rutte told politicians to face up to the country’s economic woes to ensure the Netherlands evades Europe’s debt crisis, as opposition lawmakers said there was no need to stick to budget targets. Rutte offered his cabinet’s resignation to Queen Beatrix yesterday.
The euro extended gains versus the dollar after data showed home prices in 20 U.S. cities dropped at a slower pace in the year ended February. The S&P/Case-Shiller index of property values fell 3.5 percent from a year earlier, the smallest 12- month drop since February 2011. Sales of new U.S. homes in March were stronger than forecast, Commerce Department data showed.
South Africa’s rand gained 0.6 percent to 7.7967 per dollar, and Canada’s dollar appreciated 0.4 percent to 98.71 cents to the greenback.
The Aussie dollar was little changed at $1.0315 after falling earlier to $1.0247, the weakest since April 11.
Hungary’s forint was the best-performing emerging-market currency after Prime Minister Viktor Orban said the European Commission and Hungary have moved “a lot closer” to proceeding with rescue talks even as several issues are unresolved.
The commission will decide tomorrow whether to allow the talks to proceed, Orban said. It has blocked Hungary’s request for an International Monetary Fund loan on concern Orban’s concentration of power in the past two years undermined the independence of state institutions including the central bank.
The forint advanced 2 percent to 222.49 per dollar and gained 1.7 percent against the euro to 293.61.
Sterling reached a 20-month high against the euro and touched the strongest in more than five months versus the dollar before a report tomorrow that’s forecast by a Bloomberg survey to show U.K. gross domestic product gained 0.1 percent. It shrank 0.3 percent in the fourth quarter.
The pound rose 0.1 percent to 81.44 pence per euro, the strongest level since August 2010, before trading at 81.74 pence, down 0.2 percent. The British currency gained 0.2 percent to $1.6164, the highest since Oct. 31, before trading little changed at $1.6144.
Japan’s currency has slid 8.3 percent this year, the worst performer among the 10 developed-nation currencies tracked by Bloomberg Correlation Weighted Indexes. The dollar has declined 2.4 percent, and the euro has weakened 0.5 percent.
The yen dropped versus most major peers today amid bets the Bank of Japan (8301) will announce further monetary easing policies on April 27. The central bank is “committed” to monetary easing, Governor Masaaki Shirakawa said last week in New York.
The dollar is poised to resume a bullish trend against the yen and may rise to a one-year high as a corrective decline ends, according to Bank of America Corp.
The U.S. currency has gained 1 percent since April 16, when it fell to as low as 80.30 yen after a 4 percent drop since mid- March. The dollar’s ability to rally off that low, a level just above its pivot support range of 79.54 to 80.15 yen, indicates it may gain to 84.82 or 85.45 yen, MacNeil Curry, head of foreign-exchange and interest-rates technical strategy at Bank of America in New York, said in a telephone interview.
Support is a chart area where buy orders may be clustered.
The U.S. Federal Open Market Committee begins a two-day meeting today and is scheduled to release a statement tomorrow on monetary policy. All 79 economists surveyed by Bloomberg estimated the Fed will keep its benchmark interest rate in a range of zero to 0.25 percent.
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