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Euro Strengthens After China Says Taken Steps to Help Europe

Euro Rises as China Says Taken ‘Concrete Action’
Wang Qishan, China's vice premier, speaks at the Third China - EU High Level Economic and Trade Dialogue in Beijing. Photographer: Nelson Ching/Bloomberg

Dec. 21 (Bloomberg) -- The euro rose from near a two-week low against the dollar and yen after Chinese Vice Premier Wang Qishan said his nation had taken “concrete action” to help the European Union with its debt problems.

The single currency strengthened against 14 of its 16 major counterparts on speculation investments by China, which holds a record $2.65 trillion in foreign-exchange reserves, will ease Europe’s sovereign fiscal crisis and boost the allure of assets in the region. The yen reached a one-week high versus the dollar on speculation Japanese exporters bought the currency to bring home funds before the end of the year.

“The comments would be a good Christmas present for the euro if Asian support for the EU continues into next year,” said Kurt Magnus, executive director of foreign-exchange sales at Nomura Holdings Inc. in Sydney. “There’s a lot of people looking to sell euro and go into 2011 with a core short position and there’s no way that you would be short euro,” if China continued to support the region, he said.

The euro climbed to $1.3175 as of 6:52 a.m. in London from $1.3131 in New York yesterday, when it dropped to $1.3095, the lowest since Dec. 2. The common currency rose to 110.24 yen from 110 yen yesterday, when it fell to 109.58, the weakest since Dec. 7. The yen rose to 83.67 per dollar from 83.77 after reaching 83.57, the strongest since Dec. 14.

Largest Partner

The EU is China’s largest trade partner and China is the region’s second-biggest export market, with bilateral trade increasing 33.1 percent in the 11 months through November from a year earlier to $433.88 billion, China’s customs department said on Dec. 10.

“EU members have taken a number of steps to actively respond to the sovereign-debt crisis,” Wang said at a forum in Beijing today. “We hope these measures will quickly produce results and lead to a steady recovery of the EU economies.”

The euro weakened yesterday on speculation some European nations will struggle to raise funds amid a slew of credit-rating and outlook changes.

Moody’s Investors Service last week cut Ireland’s debt rating by five levels and put Greece on review for a possible “multi-notch” downgrade. The company said Dec. 15 it may lower Spain’s creditworthiness. Standard & Poor’s is reviewing its assessments of Ireland, Portugal and Greece.

Further Downgrades

“We should expect a string of potential multi-notch downgrades in late January and early February,” said Robert Rennie, chief currency strategist in Sydney at Westpac Banking Corp., the nation’s second-biggest lender. “We get a number of reviews at the end of January, a heavy auction schedule and a shorter month due to holidays at the beginning and end of the month. We’re surprised that euro isn’t lower.”

The common currency will strengthen to $1.33 by March 31, according to the median forecast of 45 analysts polled by Bloomberg News.

The yen climbed to a one-week high versus the dollar on speculation Japanese exporters purchased the nation’s currency as year-end approaches.

“There’s talk of Japanese exporters buying their currency,” said Takashi Kudo, general manager of market information services at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp. “This may be related to seasonal factors such as the end of the month and year.”

Large Manufacturers

Japan’s large manufacturers expect the yen to trade at an average of 86.47 per dollar in the year through March, the highest since the Bank of Japan’s Tankan business-confidence survey included the yen-forecast question in 1996, compared with the 89.66 predicted in September, the survey showed Dec. 15.

Fumio Ohtsubo, president of Panasonic Corp., the world’s largest maker of plasma televisions, said this month the yen’s appreciation is making it tougher for the company to compete with its South Korean rivals, such as Samsung Electronics Co. The yen has risen 11 percent versus the won this year.

Taiwan’s dollar rose toward a 13-year high after better-than-forecast export orders boosted optimism about the island’s growth prospects.

Orders for overseas shipments increased by 14.3 percent last month, higher than the 13.3 percent median estimate of economists in a Bloomberg survey, the Ministry of Economic Affairs said yesterday. The government will say tomorrow the jobless rate fell to an almost two-year low of 4.9 percent, according to a separate Bloomberg survey.

“Sentiment for the Taiwan dollar is strong because of strong exports and economic growth,” said Hao-Yun Juan, a currency trader at King’s Town Bank in Taipei.

Taiwan’s dollar climbed 2.4 percent to NT$29.890 against its U.S. counterpart. The currency reached NT$29.766 on Dec. 17, the highest since October 1997.

New Zealand’s currency gained for a second day as prices rose for commodities, which are a majority of its exports. Copper climbed for a third day from London to Shanghai and oil rose. The so-called kiwi rose 0.8 percent to 74.82 U.S. cents.

To contact the reporters on this story: Candice Zachariahs in Mumbai at czachariahs2@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

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