Euro Gains Versus Major Peers on ECB Speculation; Real Tumbles

Japanese Yen
The yen will probably strengthen to 100 per dollar by Dec. 31, according to the median estimate of analysts surveyed by Bloomberg. The euro will probably be at $1.34 by then, a separate poll showed. Photographer: Yuriko Nakao/Bloomberg

The euro strengthened against most major peers amid speculation the European Central Bank won’t add to monetary accommodation efforts that may push the shared currency lower.

The yen gained for the first time in four days versus the dollar after minutes of the Bank of Japan’s October meeting showed some officials saw risks to the economy. Europe’s 17-nation shared currency climbed versus the greenback as China’s central-bank governor said it was important to his nation’s reserve management and an ECB policy maker said inflation should pick up gradually. Brazil’s real fell against most major counterparts.

The ECB is “likely to defer a recommendation for the next couple of meetings, which is helping the euro today,” Charles St-Arnaud, a foreign-exchange strategist at Nomura Holdings Inc. in New York, said in a phone interview. “We’ve gotten discussions showing there’s no real consensus on what the ECB wants to do over the next few meetings.”

The euro strengthened 0.4 percent to $1.3572 per dollar at 5 p.m. New York time after rising to $1.3575, the highest level since Nov. 20. The 17-nation currency was little changed at 137.46 yen. Japan’s currency appreciated 0.4 percent to 101.28 per dollar after gaining 0.5 percent, the most since Nov. 13.

Australia’s dollar fell 0.8 percent to 92.44 yen after decreasing 1 percent to 92.25, the weakest since Oct. 10.

The Bloomberg U.S. Dollar Index, which tracks the currency against 10 major counterparts, fell 0.2 percent to 1,018.83 after gaining 0.1 percent.

Real, Franc

Brazil’s real dropped amid speculation the nation’s highest court will rule against banks in a case that may cost the lenders $65 billion. The currency slipped 0.2 percent to 2.2947 per dollar after declining 0.8 percent, the most since Nov. 21.

The Swiss franc rose against all major peers even after Swiss National Bank President Thomas Jordan said the cap on the franc remains appropriate given the currency’s strength and economic risks in the euro area. The Zurich-based central bank set a cap of 1.20 per euro on the franc in September 2011 and has promised unlimited currency interventions to defend it.

The franc gained 0.2 percent to 1.2304 per euro while adding 0.6 percent to 90.66 centimes per dollar.

Indonesia’s rupiah dropped to a four-year low after the government raised $190 million yesterday by selling dollar-denominated bonds to local investors, who submitted $294 million of bids, short of the $450 million goal.

The rupiah declined 0.2 percent to 11,763 per dollar after sliding to 11,798, the weakest level since March 2009.

Diversified Holdings

The shared currency gained for the third time in four days against the dollar after Market News International reported the comments from People’s Bank of China Governor Zhou Xiaochuan.

“The China comment acts as a strong reminder to the market that large central banks around the world are looking to diversify their dollar holdings, in part in favor of the euro,” said Neil Jones, head of European hedge-fund sales at Mizuho Bank Ltd. in London. “When ECB members are doubting disinflation concerns and giving more upbeat growth expectations, this also boosts the euro.”

ECB Executive Board member Benoit Coeure said in an interview with CNBC today that the central bank doesn’t “see it as a very likely prospect that disinflation would deepen, would worsen in the euro zone as growth recovers, which is our main scenario.”

‘Downside Risks’

Inflation in Europe stayed close to a four-year low in November with a reading of 0.8 percent, according to the median prediction of economists surveyed by Bloomberg News before the report on Nov. 29.

BOJ board member Sayuri Shirai proposed adding “attention should be paid to the downside risks” to the bank’s outlook report as “there was a high degree of uncertainty regarding developments in overseas economies and households’ employment and income situation,” the BOJ minutes showed.

“The yen has weakened significantly over the past couple weeks, so it’s experiencing a bit of a relief rally,” Eric Viloria, senior currency strategist at Gain Capital Group in New York, said in a phone interview. “There are officials within the BOJ that may be a little more cautious about the prospects of growth.”

Trading Range

The central bank said in April it wanted to achieve 2 percent inflation in about two years. Consumer prices excluding fresh food climbed 0.7 percent in September from a year ago, the government said on Oct. 25.

The yen has tumbled 13 percent this year, the worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro advanced 7.1 percent and the dollar strengthened 3.8 percent.

“We’re probably in the process of going from a trading range that had been 95 to 100 for quite some time to, I think, probably 100 to 105,” Robert Sinche, global strategist at Pierpont Securities Holdings LLC in Stamford, Connecticut, said in an interview on Bloomberg Radio’s “Surveillance” with Tom Keene.

The yen will strengthen to 100 per dollar by year-end, according to the median estimate of analysts surveyed by Bloomberg. The euro will be at $1.34 by then, a separate survey showed.

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