The euro rose from a three-week low versus the dollar as optimism that growth in Europe is accelerating overshadowed concern that the region’s debt crisis will worsen.
The single currency strengthened against 13 of its 16 major counterparts before a report tomorrow that’s forecast to show Europe’s economy grew at a faster pace in the first quarter. Australia’s dollar weakened after a government report showed employers unexpectedly cut workers last month. The Norwegian krone advanced on speculation the central bank may raise its benchmark interest rate for the first time in a year.
“Market participants are aware economic data in the euro-zone have been strong,” said Junichi Ishikawa, a Tokyo-based market analyst at IG Markets Securities Ltd. “The underlying theme is rate differentials, which is a supportive factor for the euro.”
The euro advanced 0.2 percent to $1.4213 as of 8:23 a.m. in London. It yesterday depreciated to $1.4172, the weakest since April 18. The single currency also rose 0.2 percent to 115.21 yen, after slipping 1.3 percent yesterday. The dollar was little changed at 81.06 yen from 81.05 yen.
The 17-nation region’s economy expanded at a 2.2 percent annual rate in the first quarter, up from 2 percent growth in the previous three months, according to a Bloomberg News survey before tomorrow’s report.
The European Central Bank will raise its target rate by 91 basis points over the next 12 months, a Credit Suisse Group AG index showed. That’s up from 74 basis points of tightening predicted on May 10. The Federal Reserve is forecast to boost its benchmark by 29 basis points over the same period, a separate index showed.
Europe’s currency slumped 1.5 percent against the dollar yesterday on speculation European leaders are slowing the drive to grant Greece additional aid, fueling concern the nation may have to restructure debt.
Standard & Poor’s cut Greece’s debt rating two levels to B on May 9, citing the likelihood of debt restructuring. European finance chiefs held an unscheduled meeting in Luxembourg on May 6 and said Greece needs “a further adjustment program” on top of its existing 110 billion-euro ($156 billion) rescue package.
“The issue remains the periphery and while there was no fresh news, apart from some fresh suggestions of possible Finnish recalcitrance regarding Portugal’s bailout, the euro will be curtailed by uncertainty,” Daragh Maher, deputy head of global foreign exchange strategy at Credit Agricole CIB in London, wrote in a note today.
S&P may downgrade its BBB- debt rating for Portugal if the nation’s banks are unable to meet capital rules or if they require more funding than currently anticipated, the ratings company said yesterday. Finland will back a bailout for Portugal, provided it agrees to conditions including state asset sales, said Finance Minister Jyrki Katainen.
The krone appreciated 0.5 percent to 5.4916 per dollar before the Norges Bank decision at 2 p.m. today in Oslo. The Norwegian currency strengthened 0.3 percent to 7.8074 per euro. The bank will raise its overnight deposit rate to 2.25 percent, according to 15 of the 20 economists surveyed by Bloomberg, while five expect no change.
Australia’s dollar dropped for a second day as investors trimmed bets on central-bank rate increases after employment dropped by the most since 2009.
The number of people employed in Australia declined by 22,100, following a 43,300 gain in March, the statistics bureau said. The jobless rate held at 4.9 percent.
The Reserve Bank of Australia will raise its benchmark by 33 basis points over the next 12 months, down from 38 basis points of increases predicted yesterday, another Credit Suisse index showed.
“With high fuel prices, a strong currency and concerns about taxation, you get the sense that this mixture of negatives is beginning to weigh on the manufacturing states,” said Robert Rennie, chief currency strategist in Sydney at Westpac Banking Corp. “Today’s data takes a bit of the shine and mystery off the Aussie dollar.”
Australia’s currency dropped 0.7 percent to $1.0628, and slid 0.6 percent to 86.19 yen.