Currencies of three major commodity-producing nations including Australia rose to the highest level in five months amid speculation China will add monetary stimulus, boosting demand for energy and materials.
The euro rose against 12 of its 16 major peers after German consumer-price inflation slowed less than some traders anticipated before the European Central Bank meets next week. The Australian dollar had its biggest weekly gain in almost two months as Chinese Premier Li Keqiang said he’s confident of keeping growth in a “reasonable range.” The yen sank versus all 31 major peers.
“We’ve seen massive interest in the last two weeks on commodity currencies,” Sebastien Galy, a senior currency strategist at Societe Generale SA in New York, said in a phone interview. Investors are weighing China’s slowing economy with the “cyclical view that maybe if they ease, it’s going to ease these problems and we get a cyclical recovery, and that boosts assets, that boosts commodity currencies and the like.”
An equally weighted basket of the so-called dollar-bloc currencies -- those of Australia, New Zealand and Canada, all commodity producers -- rallied to 102.56, the highest level since Oct. 22, against the yen and the dollar.
The euro rose 0.1 percent $1.3752 at 5 p.m. New York time after falling 0.3 percent earlier to $1.3705, the lowest since Feb. 28. Europe’s tender declined for a second week, losing 0.3 percent. It has depreciated 0.4 percent this month.
The common currency climbed 0.7 percent to 141.40 yen. It gained 0.3 percent this week and has advanced 0.7 percent in March. The Japanese currency fell 0.6 percent to 102.83 per dollar. The yen depreciated for the second week against the greenback and has fallen 1 percent this month.
Futures traders reduced bets the euro will gain against the U.S. dollar after six-straight weeks of increases, figures from the Washington-based Commodity Futures Trading Commission show.
The difference in the number of wagers by hedge funds and other large speculators on an advance in the euro compared with those on a drop -- so-called net longs -- was 39,634 on March 25, compared with 52,991 a week earlier, the most since Nov. 1.
Speculators decreased bets Canada’s dollar will weaken against the greenback, known as net shorts, by 36,950, the most on record going back to 1993. Net shorts totaled 33,215 on March 25, versus 69,805 a week earlier.
Deutsche Bank AG’s Currency Volatility Index, based on three-month implied volatility on nine major currency pairs, fell for the first time in four days. It was at 7.36 percent, from 7.51 percent yesterday. The gauge dropped on March 24 to 7.02 percent, the lowest since December 2012. The average over the past year is 8.56 percent.
The Bloomberg Dollar Spot Index rose 0.1 percent to 1,016.26 after the Commerce Department reported consumer spending in February increased 0.3 percent, the most in three months, as incomes picked up. Federal Reserve Bank of Chicago President Charles Evans said the U.S. central bank will probably raise interest rates in the second half of next year. He spoke in a Bloomberg Television interview.
The euro erased losses against the dollar after data showed German inflation, calculated using a harmonized European Union method, was 0.9 percent this month from a year earlier, versus 1 percent in February, according to the Federal Statistics Office. That was in line with the median forecast in a Bloomberg News survey. Eurostat, the EU’s statistics office, releases euro-area inflation data March 31.
Spanish prices fell 0.2 percent from a year ago, the first decline since October 2009, the National Statistics Institute INE said earlier.
“The market has been sensitive to weak European inflation data, but at the end of the day it is not enough to keep market players short euros,” said Michael Woolfolk, a global-markets strategist at Bank of New York Mellon in New York. Short positions are bets a currency will decrease in value.
The euro has dropped 1.1 percent in the past three months in a basket of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar has fallen 1.2 percent, while the yen strengthened 1.4 percent.
“Disappointing inflation data will heighten market expectations of an ECB rate cut,” said Masato Yanagiya, head of foreign exchange and money trading at Sumitomo Mitsui Banking Corp. in New York.
ECB Governing Council member Luis Maria Linde said this week policy makers take the risk of deflation seriously and more monetary easing hadn’t been ruled out.
The council will keep the benchmark interest rate unchanged at a record-low 0.25 percent when it announces a policy decision on April 3, according to most economists surveyed by Bloomberg.
The Australian dollar gained to the strongest since November as Li said China can’t ignore “difficulties and risks” from downward pressure on the economy. The nation is Australia’s largest trading partner. China’s manufacturing industry weakened for a fifth straight month, according to a preliminary measure for March released March 24.
The Aussie has gained 1.8 percent this week, the most since the five days ended Feb. 7, to 92.47 U.S. cents. It touched 92.95 cents today, the highest since Nov. 21.
New Zealand’s currency, called the kiwi, rose as much as 0.3 percent today to 86.97 U.S. cents, the strongest level since Aug. 2, 2011, before trading at 86.61 cents, down 0.1 percent.
Interest-rate swaps data compiled by Bloomberg showed traders were certain the Reserve Bank of New Zealand will increase borrowing costs at its next policy review on April 24. Bank Governor Graeme Wheeler raised the official cash rate by a quarter-percentage point to 2.75 percent at the most recent meeting on March 13.