Euro Falls From 8-Month High on Cliff Talks; Yen Declines
The euro fell from an eight-month high against the dollar as President Barack Obama accused Republicans of “wasting time” and “posturing” in proposals to avert the so-called fiscal cliff.
The shared currency earlier strengthened after a German report showed business confidence was higher than forecast. Japan’s currency was lower against the euro as investors speculated the nation’s central bank will expand stimulus at a two-day meeting ending tomorrow. Norway’s krone rose as Norges Bank kept interest rates unchanged.
“Markets are tracking the fiscal cliff news -- markets have been relatively complacent on the cliff as we’ve seen wide expectations for a deal to be reached by the end of the year,” said Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New York. “German Ifo helped us get to the $1.33 level on the euro, but with year-end there is limited participation.”
The euro was little changed at $1.3227 at 5 p.m. New York time, after climbing to the strongest level since April 3. The common currency rose 0.2 percent to 111.65 yen after reaching the highest since August 2011. The yen fell 0.2 percent to 84.41 per dollar.
Gains in the 17-nation currency were limited as the 14-day relative strength index versus the dollar rose to 71.2 and against the yen gained to 80.7. A reading above 70 indicates an asset’s value may have appreciated too far, too quickly.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, was little changed at 79.351 after falling to the least since Oct. 18. The gauge is weighted 57.6 percent to movements in the euro.
Political leaders in Washington are debating how to avoid the so-called fiscal cliff, more than $600 billion in automatic tax increases and spending cuts that will take effect in January unless Congress acts.
The White House is reported to have told business leaders the budget talks regressed today.
“We’ve been wasting a lot of time” with political “posturing,” Obama told reporters today. “I remain eager to get something done.”
The dollar will strengthen to $1.27 per euro by the end of June, according to a Bloomberg survey of analysts. The greenback will trade at 83 yen, a separate survey found.
The Ifo institute’s business climate index, based on a survey of 7,000 executives, climbed to 102.4 in December from 101.4 the previous month. That’s the second straight increase after sentiment dropped to a 2 1/2-year low in October. Economists surveyed by Bloomberg News predicted a gain to 102.
“There’s an element of year-end position squaring where people have been underweight the euro, breaking of technical levels and a couple generally positive developments in Europe,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. “No matter how equities perform, we should see the euro move higher today.”
Norway’s currency rose to its strongest since March as the Norges Bank announced it would keep interest rates a 1.5 percent. The central bank is trying to balance rising housing prices without strengthening the krone.
The krone gained 0.5 percent to 5.5708 per dollar after appreciating to the strongest since Feb. 29.
South Africa’s rand fell for the first time in four days after rallying to a two-month high against the dollar. The rand depreciated 0.4 percent to 8.4840 per dollar.
The seven-day relative strength index for the currency versus the greenback was at 77, above the 70 level for a fourth day. A reading of 70 indicates an asset’s value may have appreciated too quickly and is due for a correction.
The yen dropped for a third day versus the dollar after a Japanese government report showed the trade deficit widened in November. Historically, the currency has been considered a safe haven because the nation is traditionally a world net-creditor.
Exports slid 4.1 percent from a year earlier, the Finance Ministry said in Tokyo. The median forecast of 23 economists was for a 5.5 percent decline. Imports rose 0.8 percent leaving a deficit of 953.4 billion yen, the third-largest on record.
Seventeen of 21 analysts surveyed by Bloomberg forecast Japan’s central bank will ease monetary policy at its meeting. Newly elected Prime Minister Shinzo Abe, said yesterday he requested BOJ Governor Masaaki Shirakawa agree to an accord with a 2 percent inflation target.
Japan’s currency has tumbled 12.7 percent this year, the worst performer among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar has weakened 3.3 percent and the euro has dropped 1.1 percent.
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