Euro Near Two-Week Low Before German Confidence Data; Kiwi Rises

The euro was 0.2 percent from a two-week low before a German report forecast to show business confidence fell in the currency bloc’s largest economy, fueling speculation the European Central Bank will cut interest rates.

New Zealand’s dollar climbed after central bank Governor Graeme Wheeler said growth has picked up. Australia’s currency slid versus all but two of its 16 major peers after data showed inflation slowed. The yen swung between gains and losses as investors speculated whether comments from the Bank of Japan this week will weaken it to 100 per dollar for the first time in four years.

“The euro is susceptible to downward pressure,” said Masato Yanagiya, the New York-based head of foreign-exchange and money trading at Sumitomo Mitsui Banking Corp., a unit of Japan’s second-biggest financial group by market value. “As economic data from Europe are very bad, expectations of a rate cut by the ECB are rising gradually.”

The 17-nation euro traded at $1.2995 at 8:51 a.m. London time after falling to $1.2973 yesterday, the lowest since April 8. The shared currency was little changed at 129.31 yen. Japan’s currency was also little changed, at 99.52 per dollar.

The Ifo institute’s business climate index for Germany, based on a survey of about 7,000 executives, dropped to 106.2 in April from 106.7, according to the median estimate of economists surveyed by Bloomberg News before today’s report. A German purchasing managers’ index unexpectedly fell yesterday, while the Bundesbank said in its monthly report this week that the nation’s recovery may be delayed.

ECB Policy

The ECB may cut borrowing costs if data show a need for it, Executive Board Member Joerg Asmussen said April 20 on a panel in Washington. ECB President Mario Draghi said the previous day the economic situation in the euro area hasn’t improved since the central bank’s last policy meeting on April 4. The ECB’s benchmark rate is currently 0.75 percent.

In Australia, the so-called trimmed mean gauge of core prices rose 0.3 percent in the first quarter from the previous period, the Bureau of Statistics said in Sydney today, compared with the median forecast of economists of a 0.5 percent gain.

The Reserve Bank of New Zealand left its benchmark interest rate unchanged today at 2.5 percent and signaled that the “overvalued” local currency is hurting exporters.

The RBNZ “does not want to see financial or price stability compromised by housing demand getting too far ahead of supply,” Wheeler said in a statement.

RBNZ Disappoints

The central bank “has probably disappointed those in the market expecting further emphasis on the high New Zealand dollar,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp. “The kiwi-dollar has minor resistance at 84.60 cents and 85 cents beyond is a major cap.” Resistance refers to an area on a chart where analysts anticipate orders to sell may be clustered.

Australia’s dollar fell 0.8 percent to NZ$1.2124 after touching NZ$1.2111, the lowest since July 2010. The so-called Aussie was little changed at $1.0253, while the kiwi gained 0.7 percent to 84.60 U.S. cents.

The BOJ will hold a policy meeting on April 26 when it releases its outlook for the economy and inflation. It may raise its forecast for price gains for fiscal 2014, according to people familiar with the central bank’s discussions, after unveiling a plan earlier this month to double its holdings of government bonds in the next two years.

The dollar-yen rate is struggling to climb above 100 in part because of “profit taking,” said Kengo Suzuki, a currency strategist at Mizuho Securities Co. in Tokyo. Even so, “the BOJ report will show the central bank’s determination to achieve its 2 percent inflation target, so expectations for the BOJ’s action are likely to result in yen weakness.”

Insurers’ Plans

The yen has plunged 20 percent against the dollar in the past six months as Prime Minister Shinzo Abe’s Liberal Democratic Party swept to power in December on a campaign of expanded stimulus and he picked Haruhiko Kuroda to pursue monetary easing at the BOJ.

Meiji Yasuda Life Insurance Co. said today it expects the yen to be at 96 per dollar and 124 against the euro by the end of March 2014. The Tokyo-based company will “slightly” increase investments in foreign debt with and without currency hedges in the fiscal year started April 1, Japan’s third-largest life insurer said today.

The company joined Nippon Life Insurance Co., which said on April 22 that it may boost overseas bond purchases if yields in Japan remain low.

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