Euro Gains to Highest in Four Years Versus Yen on ECB Comments

The euro rose to a four-year high against the yen after a European Central Bank board member said policy makers must be “very careful” about using negative interest rates to counter low inflation.

The dollar touched a two-week low as Chicago Federal Reserve President Charles Evans said policy makers are waiting to see that the labor market “has improved substantially” before trimming the bond-buying program known as quantitative easing. Chairman Ben S. Bernanke speaks later. A gauge of global volatility fell to its lowest level this month. Economists forecast that a report tomorrow will show U.S. retail sales increased in October after dropping the previous month.

“There was suspicion the ECB might be on the verge of doing something aggressive, like QE and negative rates, but the commentaries from ECB we’ve had since than have been scaling back from it,” Geoffrey Yu, a senior foreign-exchange strategist at UBS AG in London, said in an interview. “Maybe there’s some correction to that.”

The euro rose 0.4 percent to 135.57 yen at 5 p.m. New York time after touching 135.71, the strongest since November 2009. The shared currency gained 0.2 percent to $1.3538 after reaching $1.3547, the strongest level since Nov. 6. The dollar rose 0.2 percent to 100.14 yen.

The Bloomberg U.S. Dollar Index, which monitors the greenback against 10 major counterparts, was little changed at 1,015.00 after touching 1,013.11, the lowest since Nov. 6.

Krone, Koruna

Norway’s krone rose versus all of its 16 of its most-traded counterparts after third-quarter gross domestic product increased 0.7 percent, exceeding the median economist forecast. The currency appreciated 0.3 percent to 8.2450 per euro after reaching 8.2070, the strongest level since Nov. 11. It gained 0.6 percent to 6.0897 per dollar.

The Czech koruna declined against all 31 of its major peers after Ceska Narodni Banka board member and rate-setter Lubomir Lizal said he can see the central bank intervening to weaken the currency to 28 koruna per euro. The koruna slipped 0.9 percent to 27.373 per euro after decreasing to 27.397, the weakest since April 2009.

Turkey’s lira gained versus most of its major counterparts after the country’s central bank said it terminated one-month repo auctions in order to contain the impact of exchange rate volatility on pricing behavior. The currency appreciated 0.6 percent to 2.0110 per dollar after rising to 2.0054, the highest since Nov. 1.

Asmussen’s View

The euro advanced versus most major peers after ECB Executive Board member Joerg Asmussen said policy makers haven’t exhausted their options to counter low inflation, according to an interview broadcast on Austria’s ORF radio.

“While I’d be very careful with such an instrument” as negative interest rates, he said, “I don’t want to fundamentally exclude it.”

The euro has strengthened 0.6 percent in the past month, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-nation currencies. The dollar has climbed 1.8 percent and the yen is down 1 percent.

The ZEW Center for European Economic Research said its index of German investor and analyst expectations, which aims to predict economic developments six months in advance, rose to 54.6 in November, from 52.8 the previous month. That’s the highest since October 2009 and above the 54.0 median estimate of economists in a Bloomberg News survey.

Fed Chiefs

The greenback fell a second day against most major currencies as Evans echoed comments by New York Fed President William C. Dudley yesterday, who said he’s more hopeful about the U.S. economy while indicating no change in the central bank’s bond-buying program.

At a Nov. 14 congressional hearing on her nomination to run the Fed, Vice Chairman Janet Yellen indicated she’ll press on with the central bank’s monetary stimulus until she sees a robust recovery, downplaying risks the policy is inflating asset bubbles. Bernanke will speak at the National Economists Club in Washington at 7 p.m.

“Comments from Dudley suggest the Fed is unlikely to begin tapering in December and that’s taken some of the bid away from the dollar,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “We stick to the view that the first taper will come in March.”

The U.S. central bank buys $85 billion of Treasuries and mortgage-backed securities each month to put downward pressure on borrowing costs. Officials will pare the purchases to $70 billion a month at their March 18-19 meeting, according to the median economist estimate in a Bloomberg survey on Nov. 8.

Retail Sales

The greenback weakened as a gauge of global volatility fell for a fifth day to its lowest level this month. JPMorgan Chase & Co.’s Global FX Volatility Index decreased to as low as 7.75 percent, its weakest on an intraday basis since Oct. 31.

“The dollar is under a little bit of pressure,” Sireen Harajli, a foreign-exchange strategist at Mizuho Bank in New York, said in a phone interview. “Volatility is low, so we’re not seeing too much movement right now. Markets are in wait-and-see mode ahead of some key data we’re going to get tomorrow.”

The Commerce Department will say tomorrow that retail sales in the world’s biggest economy increased 0.1 percent in October after a 0.1 percent decline the previous month, according to the median estimate of economists surveyed by Bloomberg News. A separate report the same day is projected to show consumer prices stagnated in October from the previous month, after rising 0.2 percent in September.

The U.S. economy will grow 1.7 percent and 2.9 percent this year, the Organization for Economic Cooperation said in a semi-annual report today, broadly similar to the group’s May outlook. The world economy will probably expand 2.7 percent this year and 3.6 percent next year, instead of the 3.1 percent and 4 percent predicted in May, the Paris-based OECD said.

Options Trading

Trading in over-the-counter foreign-exchange options totaled $61 billion, from $55 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- Chinese yuan exchange rate amounted to $18 billion, the largest share of trades at 30 percent. Options on the dollar-yen rate totaled $12 billion, or 20 percent.

Dollar-yuan options trading was 381 percent more than the average for the past five Tuesdays at a similar time in the day, according to Bloomberg analysis. Dollar-yen options trading was 36 percent above average.

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