Euro Rises 6th Day Versus Yen as ECB Ready to Start Buying Bonds

Euro Rises for Sixth Day Versus Yen Before ECB
The euro appreciated against all but one of 16 major counterparts on speculation ECB President Mario Draghi will provide more detail of the bond-purchase program announced last month. Photographer: Kiyoshi Ota/Bloomberg

The euro rose for a sixth day against the yen, the longest run since March, as European Central Bank President Mario Draghi said the currency was irreversible and that the bank’s decision to purchase bonds helped ease tensions.

The 17-nation currency gained the most in almost three weeks versus the dollar after Draghi said the ECB was ready to start buying government debt from nations such as Spain as soon as the necessary conditions are met. The dollar remained lower after minutes of the Federal Reserve’s last meeting showed policy makers saw manageable risks in a third round of U.S. bond buying. A measure of volatility fell to the lowest level in almost five years. U.S. stocks rose for a fourth day.

“Draghi’s moderately constructive comments today helped risk-on sentiment,” Carl Forcheski, a director on the corporate currency sales desk at Societe Generale SA in New York, said in a telephone interview. “Stocks are also up a little bit today. The euro is firmer and moving up nicely.”

The euro advanced 0.9 percent to 102.17 yen at 5 p.m. in New York after rising earlier to 102.21 yen, the strongest level since Sept. 20. Japan’s currency depreciated past its 200-day moving average against the 17-nation currency, 101.76 yen, for the first time in more than a week.

The shared currency gained 0.9 percent to $1.3018. It jumped as much as 1 percent, the biggest intraday increase since Sept. 14. The yen was little changed at 78.48 per dollar after rising 0.2 percent earlier to 78.30 per dollar and falling 0.3 percent to a two-week low of 78.72. The Bank of Japan ends a two-day meeting tomorrow.

Low Volatility

Price swings in Group of Seven currencies declined, according to a JPMorgan Chase & Co. index of volatility. The gauge touched 7.71 percent, the lowest level since October 2007.

The Standard & Poor’s 500 Index rose 0.7 percent.

The euro remained higher as U.S. Labor Department data showed applications for jobless benefits increased 4,000 to 367,000 in the week ended Sept. 29. A Bloomberg News survey forecast 370,000 claims.

A government report tomorrow will show U.S. employers hired 115,000 workers in September, more than the prior month, while the jobless rate rose to 8.2 percent from 8.1 percent, according to Bloomberg survey projections. The rate has exceeded 8 percent since February 2009.

Fed policy makers said they saw manageable risks in a third round of bond-buying under quantitative easing they began last month, according to minutes released today of the Federal Open Market Committee’s Sept. 12-13 gathering in Washington. They decided to purchase $40 billion of mortgage bonds a month until the economic recovery is well under way.

‘Make Adjustments’

“Most participants thought these risks could be managed since the committee could make adjustments to its purchases, as needed, in response to economic developments or to changes in its assessment of their efficacy and costs,” the minutes said.

South Africa’s rand fell versus all of its 16 most-traded peers as foreign investors sold the nation’s bonds and stocks after strikes spread in its mining and transport industries.

The currency slid 1 percent to 8.5206 per U.S. dollar and touched 8.5466, its weakest level since July 25. The rand dropped 1.9 percent to 11.0938 per euro and reached 11.1035, the lowest since Nov. 30.

The Canadian dollar gained versus its U.S. peer after Bank of Canada Senior Deputy Governor Tiff Macklem reiterated policy makers may withdraw monetary stimulus as the nation’s economy recovers. The central bank has kept its key interest rate at a record low 1 percent since September 2010 to support growth.

‘Hawkish Comments’

“The very hawkish comments by the deputy governor have helped as he reiterated that the Bank of Canada still prefers higher rates,” said Steve Butler, director of foreign-exchange trading in Toronto at Bank of Nova Scotia’s Scotia Capital unit.

The loonie, as the currency is nicknamed, strengthened 0.7 percent to 98.04 cents per U.S. dollar.

The ECB is ready to undertake bond purchases under its plan known as Outright Monetary Transactions “once all the prerequisites are in place,” Draghi said at a press conference in Ljubljana, Slovenia. At last month’s conference, Draghi unveiled the program of unlimited debt buying to cap borrowing costs for debt-ridden nations in the currency bloc.

The decision has helped lower “concerns about the materialization of destructive scenarios” in the region’s economy, he said, calling the shared currency “irreversible.”

The central bank left its benchmark interest rate at a record low of 0.75 percent.

‘Declining Expectations’

“The euro up-move likely reflects declining expectations of further rate cuts from the ECB in the near term,” said Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London.

Spain sold a combined 3.99 billion euros ($5.19 billion) of two-, three-and five-year notes today as investors debated whether the nation will ask for an international bailout. Prime Minister Mariano Rajoy this week denied he has any immediate plans to do so.

The nation was told today by Europe’s economic overseers that its 2013 plan to cut the deficit to 4.5 percent of gross domestic product relies on excessively optimistic assumptions, two people familiar with the issue said. The 2013 budget assumes the economy will shrink 0.5 percent, less than the 1.3 percent contraction predicted by 21 analysts surveyed by Bloomberg.

Pound Gains

The pound strengthened versus the dollar after the Bank of England left its asset-purchase target at 375 billion pounds ($604 billion) at its monthly gathering and kept its main interest rate at 0.5 percent. Sterling appreciated 0.7 percent to $1.6191 and declined 0.2 percent to 80.40 pence per euro.

The yen fell versus most of its major peers before the Bank of Japan announces its policy decision tomorrow. Japanese reports over the past week have added to the case for the central bank to expand stimulus to boost growth and achieve its 1 percent inflation goal. Consumer prices in August matched the steepest decline in 16 months and the nation’s biggest manufacturers grew more pessimistic last quarter.

The yen declined 2.1 percent in the past month, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The dollar dropped 2 percent, while the euro appreciated 1.6 percent.

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