Euro Has Longest Stretch of Monthly Gains in Decade

The euro gained for a sixth straight month against the dollar, the longest winning streak in almost a decade, as optimism increased that the worst is over in the currency bloc’s sovereign-debt crisis.

The European currency also rose versus the yen for a sixth month, the longest stretch since the euro began trading in 1999. It reached the highest level against the greenback since November 2011 today as it fluctuated after data showed drops in German retail sales and unemployment. The Dollar Index declined as U.S. jobless-benefit claims rose more than forecast. South Africa’s rand climbed versus all of its 16 most-traded peers.

“The big trend of what’s happening is a gradual unwinding of bearish euro positioning over the last month or two,” Dan Dorrow, head of research in Stamford, Connecticut, at Faros Trading LLC, said in a telephone interview. “That’s what’s been pushing up the currency a lot.”

The euro reached $1.3594, the highest level since Nov. 18, 2011, before trading little changed at $1.3575 at 2:31 p.m. New York time. It lost 0.2 percent earlier. Europe’s common currency gained 0.4 percent to 124.03 yen and touched 124.18, the highest since May 2010. It fell earlier to 122.99 yen. The dollar rose

0.3 percent to 91.37 yen and reached 91.42, the strongest since June 2010.

The 17-nation currency has gained 2.9 percent in January against the greenback, the most since October 2011. It hasn’t strengthened for six consecutive months since May 2003. The euro has climbed 8.4 percent versus the yen in January, the biggest monthly advance since February 2012.

Rand Rallies

South Africa’s rand climbed after producer inflation data was lower than forecast and the nation’s monthly trade deficit narrowed in December. Producer prices were unchanged at 5.2 percent, versus a 5.5 percent estimated in a Bloomberg survey, and the trade gap decreased to 2.7 billion rand ($303 million), from 7.9 billion the previous month.

The rand appreciated 1.2 percent to 8.9311 per dollar after weakening 0.4 percent earlier.

The Malaysian ringgit slid the most this week since May, a 2 percent drop, on speculation Prime Minister Najib Razak will call an early general election that may weaken the coalition’s grip on power. It declined 0.8 percent to 3.1060 today after earlier touching 3.1148, its lowest since Sept. 7.

New Zealand’s dollar rose against most major peers after the nation’s central bank said it expects the economy to grow this year. The kiwi, as the currency is nicknamed, gained 0.7 percent to 84.13 U.S. cents and rose 0.9 percent to 76.82 yen, the highest level since August 2008.

Best Performer

The euro has been the best performer this year among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes, gaining 2.7 percent. The yen weakened 6 percent, and the dollar declined 0.5 percent.

Economic confidence in the euro area rose in January more than forecast, European Commission data showed yesterday, adding to signs the currency bloc may be emerging from a recession. European Central Bank President Mario Draghi said last week the “darkest clouds” over the region have lifted due to decisive policy steps last year on its three-year-old debt crisis.

German unemployment unexpectedly fell in January, data showed today, adding to signs a pick-up in Europe’s largest economy is gathering pace. The number of people out of work fell a seasonally adjusted 16,000 to 2.92 million, the Federal Labor Agency said. A Bloomberg survey forecast an increase of 8,000.

A separate report by the Federal Statistics Office showed German retail sales adjusted for inflation and seasonal swings dropped 1.7 percent last month after rising in November.

Relative Strength

The shared currency may be due to reverse course, according to a technical indicator. The euro’s 14-day relative strength indexes versus the dollar and the yen were above 70 today, a level that may signal an asset has rallied too far, too quickly.

“No one really believes it’s a massive, sustainable recovery” in Europe, said Shant Movsesian, a foreign-exchange strategist at 4Cast Ltd. in London. “We’ll get a lot of ups and downs” and the euro will probably stay around current levels for the rest of the quarter, he said.

A gauge of currency volatility declined, decreasing the chance that price swings will wipe out profits. The JPMorgan G7 Volatility Index, based on three-month futures options on Group of Seven nations’ currencies, was at 8.67 percent after touching a five-month high of 9.19 percent Jan. 18. Today’s reading was close to the index’s 200-day moving average of 8.69 percent. Moving averages are seen by some traders as turning points.

The Dollar Index headed for its biggest monthly drop since September after the Federal Reserve said yesterday following a two-day meeting that it will keep buying Treasuries and mortgage bonds to spur the U.S. economy and reduce unemployment.

Fed Purchases

The Fed repeated that its purchases, divided between $40 billion a month of mortgage-backed securities and $45 billion a month of Treasury securities, will continue “if the outlook for the labor market does not improve substantially.”

The dollar gauge, which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, has dropped 0.7 percent this month to 79.2. It declined 0.1 percent today.

Initial jobless claims in the U.S. rose 38,000 in the week ended Jan. 26, the most since Nov. 10, to 368,000, the Labor Department reported. Economists forecast 350,000 filings, according to the Bloomberg survey median. The increase followed a combined 45,000 drop in the prior two weeks.

Today’s jump “shouldn’t raise any red flags because a lot of it is attributed to some of these seasonal fluctuations,” Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said before the report. “It doesn’t suggest the labor market’s deteriorating.”