Euro Rises in Longest Streak in a Year on Outlook; Krona Slides

The euro advanced for a sixth day against the dollar, the longest streak in almost a year, as regional finance ministers met in an attempt to break a deadlock about a single resolution mechanism for failed European banks.

The common currency reached the strongest level in almost six weeks against the greenback as reports showed Italy’s industrial production expanded and the economy stopped shrinking, boosting optimism the region is recovering. The euro has gained more than 1 percent versus the dollar since the day before the European Central Bank refrained from introducing a negative deposit rate at a meeting last week. Sweden’s krona fell to an 18-month low versus the euro after industrial production in the nation fell.

“Euro continuing to test new highs is a continuation of what we saw at the end of last week,” Brian Daingerfield, a Stamford, Connecticut-based currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit, said in a phone interview. “While the ECB has a myriad of options available to them, they’re pretty neutral for the moment.”

The euro rose 0.2 percent to $1.3761 at 5 p.m. in New York after reaching $1.3795, the strongest since Oct. 29. The six straight increases were the most since the seven days ending Dec. 18, 2012. The common currency fell 0.3 percent to 141.53 yen after climbing to 142.17, the highest since October 2008. The dollar fell 0.4 percent to 102.85 yen.

Dollar Measure

The Bloomberg U.S. Dollar Index, which tracks the U.S. currency against 10 major counterparts, dropped 0.3 percent to 1,012.57, reaching the lowest level since Nov. 1.

South Africa’s rand strengthened versus all 16 of its major peers after reports showed manufacturing production unexpectedly expanded 1.5 percent in October from a year earlier, compared with a 2 percent contraction predicted by 17 economists in a Bloomberg survey and a 3.3 percent decline the previous month.

The currency gained 0.3 percent to 10.3603 per dollar after touching the highest in a week.

The Brazilian real rose against the greenback for a fourth straight day in its longest winning since June as the central bank prepared to roll over foreign-exchange swaps maturing next month to bolster the currency. The currency appreciated 0.5 percent to 2.3067 after rising to its strongest since Nov. 27.

Krona Weakens

The krona fell for a fourth day versus the euro as Statistics Sweden said industrial production slid 1.7 percent in October from the previous month. The median estimate of economists surveyed by Bloomberg was for a gain of 0.9 percent.

The Swedish currency declined 0.3 percent to 8.9956 per euro.

ECB President Mario Draghi said at a press conference last week while the ECB was “technically ready” to cut its deposit rate below zero, the Governing Council only discussed a negative rate “briefly” at its meeting.

“The ECB has preserved price stability and the necessary conditions for sustainable growth, fought redenomination risks and the fragmentation of financial markets,” he said today in Rome. “Time has been gained for other actors to contribute their part in crucial policy domains that do not belong to the competence of ECB as defined by its mandate.”

Italian industrial output increased 0.5 percent in October from the previous month, the national statistics office said. Economists surveyed by Bloomberg forecast a gain of 0.2 percent. Italy’s economy was stagnant in the third quarter, the first time it hasn’t contracted since the three months through June 2011, a separate report showed.

Euro Position

“The market was positioned for a weaker euro in expectation of negative rates and what has changed is that we saw a strong implication that this is not necessarily going to be the case,” said Neil Jones, head of European hedge-fund sales at Mizuho Bank Ltd. in London. “There’s been a buying back of the euro by global investors. Meanwhile, you’ve got euro-zone economic data looking OK as well.”

The euro has gained 8.1 percent this year, the best performer of 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 3.1 percent, while the yen tumbled 14.6 percent.

The Federal Reserve will begin tapering at its Dec. 17-18 meeting, according to 34 percent of economists surveyed by Bloomberg on Dec. 6, an increase from 17 percent on Nov. 8.

Trading in over-the-counter foreign-exchange options totaled $51 billion, from $58 billion yesterday, according to data reported by U.S. banks to the Depository Trust Clearing Corp. and tracked by Bloomberg. Volume in options on the dollar-yen exchange rate amounted to $14.2 billion, the largest share of trades at 28 percent. Options on the euro-dollar rate totaled $6.5 billion, or 13 percent.

Dollar-yen options trading was 1 percent more than the average for the past five Tuesdays at a similar time in the day, according to Bloomberg analysis. Euro-greenback options trading was 17 percent below average.

To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net

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

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