Euro Falls on Draghi’s Stimulus Signal; Brazilian Real Advances

The euro dropped against 14 of its 16 major counterparts after European Central Bank President Mario Draghi said further appreciation in the currency would trigger more monetary stimulus.

The dollar had the biggest gain in more than three weeks versus Europe’s shared currency as U.S. retail sales rose in March by the most since September 2012. Brazil’s real climbed versus most major peers on bets the nation’s interest rates, which it has raised nine times in the past year, will attract investors. Russia’s ruble fell for a third day versus a target basket of dollars and euros as unrest in Ukraine escalated.

The market is “definitely paying attention to the comments, but at the same time they’re struggling to understand what the real message is and how clear the easing signal is,” Nick Bennenbroek, head of currency strategy at Wells Fargo & Co. in New York, said in a phone interview. “We had some solid U.S. data as well, so that was supportive of the dollar.”

The euro weakened 0.5 percent, the most on a closing basis since March 19, to $1.3821 at 5 p.m. in New York. It appreciated to $1.3906 on April 11, the strongest level since March 19. The 18-nation currency declined 0.3 percent to 140.76 yen. The dollar gained 0.2 percent to 101.84 yen.

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, advanced 0.2 percent to 1,008.01 following a 1 percent loss last week.

Retail Sales

The greenback extended gains versus the euro after the Commerce Department reported U.S. retail sales increased 1.1 percent. The jump exceeded the median projection of 0.9 percent in a Bloomberg survey and followed a 0.7 percent gain in February that was bigger than previously reported. Sales excluding receipts at gas stations were the strongest in four years.

The dollar will strengthen to $1.36 per euro and to 105 yen by the end of June, according to the median estimate of analysts in a Bloomberg survey.

Stocks rallied. The Standard & Poor’s 500 Index gained 0.8 percent, weathering a selloff at the start of the final hour. It lost 2.7 percent last week, the most since 2012.

The ruble sank 0.7 percent to 42.1745 versus the central bank’s target basket of dollars and euros. It was the biggest loser among all of the dollar’s 31 most-traded peers, falling 0.8 percent.

European Union foreign ministers meeting in Luxembourg said the bloc should be prepared to impose a third round of sanctions against Russia because the government in Moscow is stoking deadly separatist unrest in Ukraine.

Overshadowing Talks

Mounting tensions in Ukraine’s east, where at least one serviceman was killed at the weekend, are overshadowing crisis talks with Russia, the U.S. and the EU planned for April 17.

“Insecurity in Ukraine is written and choreographed by Russia,” U.S. Ambassador to the UN Samantha Power told the United Nations Security Council yesterday. “The U.S. stands with Ukraine and the fundamental principle that the future of Ukraine must be decided by the Ukrainian people.”

Brazil’s real rose versus all but two of its 31 most-traded peers. It strengthened as much as 0.6 percent to 2.2063 per greenback before trading at 2.2141, up 0.2 percent.

The South American nation has raised borrowing costs nine times since April 2013, the most among 49 central banks tracked by Bloomberg. It had net foreign-currency inflows of $2.3 billion last month, the most since November.

Third Best

The euro has rallied 6.6 percent in the past 12 months, the best performer after the pound and franc of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 0.5 percent, while the yen weakened 3.2 percent.

“I’ve always said that the exchange rate is not a policy target, but it’s important for price stability and growth,” Draghi said on April 12. “And now, what has happened over the last few months, it’s become more and more important for price stability.”

The ECB chief’s statement was echoed by other euro-region policy makers in weekend meetings of the International Monetary Fund and World Bank in Washington.

“Draghi wants everyone to know they are willing to address those issues, but just talking is not really going to move markets,” Fabian Eliasson, head of U.S. currency sales in New York at Mizuho Financial Group Inc., said in a phone interview.

Hedge funds and other large speculators were the least bullish on the shared currency in six weeks. The difference in the number of wagers on an advance compared with those on a decline, known as net longs, was 23,300 on April 8, the lowest since Feb. 25, figures from the Washington-based Commodity Futures Trading Commission showed on April 11.

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