Euro Climbs to 11-Month High Before ECB Loans Data as Yen Drops

The euro rose to its strongest level against the dollar in 11 months before the European Central Bank gives a first indication of how much of its three-year loans financial institutions plan to repay early.

Europe’s common currency was set for a seventh week of gains versus the yen as the Ifo institute said German business confidence rose more than economists predicted this month. The yen headed for a record run of weekly losses against the dollar as Japanese consumer prices fell. The pound slid to its weakest level in more than a year against the euro after a government report showed Britain’s economy shrank in the fourth quarter.

“The trend is relatively bullish” for the euro, said Roberto Mialich, a senior currency strategist at UniCredit SpA (UCG) in Milan. “The underlying healthy tone should be reconfirmed. The euro-dollar rate may also be helped by a firmer Ifo.”

The euro gained 0.4 percent to $1.3436 at 9:54 a.m. London time, after climbing to $1.3443, the strongest level since Feb. 29. Against the yen, it appreciated 1.1 percent to 121.95, and reached 122.19, the highest since April 12, 2011.

The Japanese currency declined 0.5 percent to 90.78 per dollar, after depreciating as much as 0.6 percent to 90.91 per dollar, the weakest level since June 2010. It was set for an 11th weekly loss, the longest losing streak in data compiled by Bloomberg going back to 1971.

ECB Loans

The ECB is due to say how much of the 1 trillion euros in three-year loans banks have pledged to hand back at the first early-repayment opportunity on Jan. 30. The statement on the so- called Longer-Term Refinancing Operations, which were granted to ease the region’s debt crisis, is due at around noon in Frankfurt. Banks will initially repay 84 billion euros, according to the median of 10 estimates in a Bloomberg News survey of economists.

KBC Bank NV said today it will give back 3.8 billion euros of the loans in the first quarter.

The Ifo institute’s business climate index, based on a survey of 7,000 executives, climbed to 104.2 from 102.4 in December. That’s the highest since June. Economists predicted a gain to 103, according to the median of 41 forecasts in a Bloomberg News survey.

The yen slipped as the statistics bureau in Tokyo said Japanese consumer prices excluding fresh food fell 0.2 percent in December from a year earlier. The Bank of Japan (8301) announced open-ended asset purchases and a 2 percent inflation target this week. Bank of Japan Governor Masaaki Shirakawa told reporters in Tokyo today that he will make “considerable efforts” to reach the goal.

Selling Yen

Morgan Stanley recommended selling the yen versus the euro, the U.S. dollar and Asian currencies, according to a report yesterday.

The yen has fallen 7.3 percent in the past month, the biggest decline among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro gained 2.2 percent in the same period while the dollar was little changed.

Sterling slid 0.5 percent to 85.16 pence per euro, reaching the weakest level since December 2011.

Gross domestic product dropped 0.3 percent from the previous three months, The Office for National Statistics said in London. That compares with the median of 38 estimates in a Bloomberg News survey for a decline of 0.1 percent.

To contact the reporters on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net

To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

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