The euro strengthened to the highest level in three weeks versus the dollar after data showed German business confidence rose in November, boosting optimism that Europe’s biggest economy is weathering the region’s slowdown.
The 17-nation shared currency registered a weekly gain versus 12 of its 16 most-traded peers on speculation Europe’s policy makers will agree to keep aid flowing to Greece when they meet on Nov. 26. The yen strengthened against the dollar as a technical indicator signaled its decline this week may have been too rapid. Sweden’s krona advanced on strong demand for higher- yielding assets.
“Certainly sentiment towards the euro has changed,” Camilla Sutton, chief currency strategist in Toronto at Bank of Nova Scotia (BNS), said in a telephone interview. Europe’s common currency “rallied slightly again after we got German confidence numbers, which highlighted better-than-expected business sentiment.”
The euro rose 0.7 percent to $1.2976 at 5 p.m. in New York and touched $1.2991, the highest since Oct. 31. It extended its weekly gain to 1.8 percent. Europe’s shared currency rose 0.6 percent to 106.91 yen, extending its five-day advance to 3.2 percent.
Japan’s currency added 0.1 percent to 82.40 per dollar, paring its decline to 1.3 percent from Nov. 16.
Sweden’s krona strengthened 0.9 percent to 6.6228 per dollar and lead all gainers with a 2.5 percent advance this week.
The rand gained for a second day, climbing the most in two weeks, as investors speculated the central bank has limited flexibility to reduce rates. South Africa’s currency advanced 0.8 percent to 8.8770 per dollar after rising as much as 1 percent, the most since Nov. 6.
The ruble headed for its biggest weekly gain in two months as companies bought Russia’s currency to pay mineral-extraction and excise taxes taxes. The currency rallied 0.4 percent to 31.0653 per dollar, extending its weekly gain to 2.2 percent, the most since the five days ended Sept. 14.
Europe’s shared currency may climb to its September high against the dollar of $1.3172 should it rise above the Oct. 31 high of $1.3021, analysts at Landesbank Hessen-Thueringen in Frankfurt including Ralf Umlauf wrote in a note to clients.
The Munich-based Ifo institute said its business climate index, based on a survey of 7,000 executives, climbed to 101.4 from 100 in October for its first gain in eight months. Economists predicted a drop to 99.5 according to the median of 48 forecasts in a Bloomberg News survey.
“The uptick in confidence is reasonably substantial and that’s constructive for Germany and for the euro area as a whole, keeping the euro relatively well-bid,” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “Assuming the politicians get a deal done on Greece, then there’s some potential for the euro to move higher.”
Europe’s shared currency climbed above its 50-day moving average of $1.2911 for the first time since August, which technical traders may perceive as a signal the euro is poised to strengthen, Bank of Nova Scotia’s Sutton said.
“When it crossed on the upside at the end of August, we had a big rally, and when it crossed on the downside in the beginning of November, we had a big drop,” Sutton said.
Euro-region finance ministers will meet on Nov. 26 to discuss ways to unlock international loans for Greece and prevent it from dropping out of the shared currency. The nation has been negotiating with euro-area politicians and the International Monetary Fund over the steps needed to qualify for the release of loan installments frozen since June.
The euro has strengthened 2.5 percent over the past three months, making it the best performer among the 10 developed- nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen is the worst performer, dropping 6.3 percent, and the dollar has fallen 1.1 percent.
The euro has risen amid a “lack of bad news, and at the margin better news,” Kit Juckes, head of foreign-exchange research at Societe Generale SA in London, said in a telephone interview. “We had a pretty big move by the dollar against a bunch of things last week, and it has lost momentum.”
The yen climbed against the dollar after its relative strength indicator signaled it may have fallen too far. The index was at 25, its fifth-straight day below the 30 level that some traders see as a sign an asset is about to change direction.
Japan’s currency still headed for a second weekly decline against the dollar as opposition leader Shinzo Abe, who is favored to become the country’s next prime minister after elections on Dec. 16, increased pressure on the Bank of Japan (8301) to add to stimulus measures that tend to weaken the yen.
“We believe the yen will start on a multi-year weakening trend,” Thanos Papasavvas, a fixed-income and currency strategist at Investec Asset Management said in an interview on Bloomberg Television’s “On The Move” with Francine Lacqua. “The most underweight currency we have is the Japanese yen because of the continuing uncertainty in the political environment.”
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