Euro Climbs Most in 3 Weeks on Signs of German Economic Growth

The euro rallied the most in three weeks against the dollar as German industrial production unexpectedly rose for a second month in March, a sign that Europe’s largest economy may be returning to growth.

New Zealand’s dollar fell to a five-week low versus its U.S. peer after Reserve Bank Governor Graeme Wheeler said the central bank has sold the currency and may do so again. Norway’s krone gained the most against the greenback of its 16 most-traded peers after policy makers declined to lower the benchmark rate. Stanley Druckenmiller, who made $1 billion for George Soros as his chief strategist by forcing a devaluation of the pound in 1992, said investors should bet against Australia’s dollar.

“We had that positive German production number this morning, so that was something that helped to boost the euro,” Eric Viloria, a senior currency strategist at Gain Capital Group LLC in New York, said in a telephone interview. “The concerns recently from a lot of the policy makers in the euro zone have been that the core has been slowing.”

The euro gained 0.6 percent to $1.3153 at 5 p.m. in New York after rising as much as 0.9 percent, the largest advance since April 16. The 17-nation shared currency climbed 0.6 percent to 130.22 yen. The yen was little changed at 99.01 per dollar.

Trading Volume

Trading in over-the-counter foreign-exchange options totaled $27 billion, compared with turnover of $33.7 billion yesterday, according to data reported by U.S. banks to the Depository Trust Clearing Corp. and tracked by Bloomberg.

Volume in options on the dollar-yuan exchange rate amounted to $5.5 billion, the largest share of trades at 20.4 percent. Dollar versus yen options were the second most-actively traded, at $5.3 billion, or 19.7 percent.

Dollar-yuan options trading was 65 percent more than the average of the past five Wednesdays at a similar time in the day, and yen trading fell 55 percent, according to Bloomberg analysis.

Norway’s central Bank kept its benchmark interest rates unchanged at 1.5 percent for a seventh meeting after fighting krone strength with verbal warnings to mitigate the exchange rate’s effect on inflation and exports. The currency rallied 1.6 percent against the dollar to 5.7490.

Peso, Zloty

Mexico’s peso erased earlier losses after the nation’s credit rating was raised one step to BBB+ by Fitch Ratings on the prospect that proposed legal changes will boost growth in Latin America’s second-largest economy. The peso rose for a second day, rallying 0.4 percent to 11.9771 versus the dollar.

Poland’s central bank cut its benchmark interest rate by a quarter point to a record low 3 percent as the European Union’s largest eastern economy struggles with slowing growth. The zloty fell as much as 0.3 percent versus the euro before trading up 0.3 percent at 4.1299.

Druckenmiller, the billionaire hedge-fund manager who returned an average of 30 percent a year from 1986 through 2010, said the long rally by commodities is over as China switches to consumption-led growth rather than investing in infrastructure.

Druckenmiller is betting the Australian dollar will “come down and come down hard,” he said today at the Ira Sohn Investment Conference in New York.

The Aussie declined 0.2 percent to $1.0170. It jumped 0.5 percent to NZ$1.2104, rallying from a more-than three-year low of NZ$1.1958 yesterday.

In China, imports rose 16.8 percent in April from the prior month, the customs administration said today in Beijing. That was more than the 13 percent increase expected by economists in a Bloomberg survey. Exports grew 14.7 percent last month from March. China is the biggest trading partner for both Australia and New Zealand.

‘Strengthening Pressure’

Wheeler told the New Zealand parliament’s finance and expenditure select committee in Wellington today that he reserves the right for further currency sales to damp gains in the kiwi. The RBNZ publishes monthly figures for its net currency sales that may or may not involve direct intervention, which show it sold NZ$2 million in March, and NZ$199 million in December. It had an intervention capacity of NZ$8.7 billion at March 31, the data shows.

The New Zealand dollar dropped 0.7 percent to 84.01 U.S. cents.

Baby Steps

The euro gained as German industrial production rose 1.2 percent in March from a revised 0.6 percent expansion the previous month, a report showed. That was a second month of gains and compares with a 0.1 percent contraction forecast by economists in a Bloomberg survey.

The shared currency extended its advance as Germany’s cabinet in Berlin approved European Union plans to place all system-relevant banks under the supervision of the European Central Bank. “Another building block toward better banking supervision in Europe,” said chief government spokesman Steffen Seibert.

“Europe is making baby-step progress in some of their structural reforms,” Brad Bechtel, managing director at Faros Trading LLC in Stamford, Connecticut, said in a telephone interview.

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