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Euro Near 7-Month High Before Consumer Confidence, PMI - (Bloomberg)

Posted by Chris Advincula on Sep 20, 2013 7:34:00 AM

The euro headed for its biggest weekly gain in two months versus the dollar before a regional report that economists said will show consumer confidence improved in September.

The shared currency traded about 0.5 percent from the strongest since 2009 versus the yen. New Zealand’s dollar rose for a fifth day after the central bank said last week higher interest rates will probably be needed. Norway’s krone slid after the Norges Bank left borrowing costs unchanged yesterday. A gauge of Asian currencies was set for the biggest weekly gain in a year after Federal Reserve policy makers this week refrained from reducing stimulus.

“What we have right now is certainly the dollar on the back foot after the Fed’s decision, but over the past few months the euro has had a little more gumption of its own,” said Jane Foley, senior currency strategist at Rabobank International in London. “This is in part a perception that the crisis is off the boil. It’s also a reflection of the very good current account position of the euro zone.”

The euro was little changed at $1.3527 as of 6:13 a.m. New York time after climbing to $1.3569 yesterday, the highest since Feb. 7. It slipped 0.1 percent to 134.39 yen, after rising to 134.95 yesterday, the most since November 2009.

The 17-nation currency was poised for a 1.7 percent weekly gain versus the greenback and yen. Japan’s currency strengthened 0.1 percent to 99.36 per dollar.

Recovery Signs

An index of household confidence in the euro area climbed to minus 14.5 in September, the most since July 2011, from minus 15.6 in August, according to a Bloomberg survey before today’s European Commission report. Markit Economics will say Sept. 23 its gauges of manufacturing and services activity based on a survey of purchasing managers rose expanded this month, separate Bloomberg surveys showed.

Germany will hold federal elections on Sunday. An INSA opinion poll published yesterday showed the opposition Social Democrats climbing one percentage point to 28 percent, 10 points behind Angela Merkel’s Christian Democratic-led group. Both main parties fell short of a majority with their preferred coalition partners in the poll.

The euro has risen 4 percent in the past six months, the second-best performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen lost 4.7 percent, while the dollar fell 1 percent.

Central Banks

European Central Bank President Mario Draghi will address the European Parliament in Brussels on Sept. 23. He has refrained from printing euros to buy bonds, contrasting with the Fed, which decided to maintain monthly asset purchases at $85 billion at a two-day meeting ended Sept. 18. Economists surveyed by Bloomberg had expected the U.S. central bank to reduce monthly Treasury purchases by $5 billion. Fed Chairman Ben S. Bernanke’s term ends on Jan. 31.

“It’s hard to cap euro gains unless the ECB delivers a clear message they will add to its easy monetary policy,” said Kikuko Takeda, a senior analyst in London at the Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s biggest financial group by market value. “The euro’s high this year around $1.37 is in sight in the short term.”

Kansas City Fed President Esther George, Minneapolis Fed President Narayana Kocherlakota, and St. Louis Fed President James Bullard will separately give speeches today. George dissented for the sixth Federal Open Market Committee meeting in a row this week, repeating that the policy risks creating financial imbalances.

‘Policy Normalization’

“I still think there’s a chance that the Fed could taper in December,” said Junichi Ishikawa, a Tokyo-based analyst at IG Markets Securities Ltd. “Bernanke is likely to set up a path for policy normalization before he departs from his post. Whether dollar-yen can retest the 100 level depends on economic data in the U.S. and the subsequent stock performance.”

The Bloomberg U.S. Dollar Index (ADXY), which tracks the greenback against 10 major currencies, was little changed at 1,011.87. The gauge closed at a seven-month low of 1,008.28 on Sept. 18 and has fallen 1.2 percent this week.

New Zealand’s currency headed for a third weekly gain, extending its advance versus the U.S. dollar since the Reserve Bank said on Sept. 12 that interest-rate increases may be required next year from the all-time low of 2.5 percent as inflation picks up.

The kiwi added 0.1 percent to 83.81 U.S cents after reaching 84.36 yesterday, the strongest since May 9. It has advanced 3.1 percent since Sept. 13.

Krone Slides

Norway’s krone dropped 1 percent to 7.9666 per euro and declined 1 percent to 5.8880 per dollar.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, climbed 0.8 percent this week to 116.13, the biggest increase since the period ended Sept. 14, 2012.

Malaysia’s ringgit led the advance as the Fed’s decision fueled demand for emerging-market assets. The ringgit strengthened 3.8 percent this week to 3.1650 per dollar. The Thai baht appreciated 2.9 percent to 30.966 versus the U.S. currency, while the Indonesian rupiah rallied 0.5 percent to 11,350. 


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