Euro Trades Near 3-Week High as ECB Tightens Faster Than Fed
July 04, 2011, 8:54 PM EDTBy Yoshiaki Nohara and Kristine Aquino
July 5 (Bloomberg) -- The euro was 0.3 percent from a three-week high against the dollar on speculation the European Central Bank will continue to lead its U.S. counterpart in monetary tightening.
The euro was 0.2 percent from a four-week high against the yen on prospects the ECB will raise interest rates on July 7 even as concerns about debt-stricken Greece linger. Data this week are forecast to show U.S. employers expanded payrolls at a pace that failed to reduce the jobless rate, adding to bets the Federal Reserve will keep interest rates near zero for longer. New Zealand’s dollar climbed to a record after a report showed business confidence in the nation rebounded in the second quarter.
“We’re looking for the Fed to do something in the first quarter next year but it seems like the risk is probably that gets delayed,” said Grant Turley, a senior currency strategist at Australia & New Zealand Banking Group Ltd. in Sydney. “The ECB targets headline inflation and they’re moving to respond to that. In an overall sense, we see the U.S. dollar weaker and the euro to move higher.”
The euro traded at $1.4537 as of 9:03 a.m. in Tokyo from $1.4539 in New York yesterday, when it reached $1.4578 yesterday, the highest level since June 9. The common currency was at 117.53 yen from 117.47. It touched 117.74 yen yesterday, the strongest since June 8. The dollar fetched 80.85 yen from 80.80.
U.S. financial markets were closed yesterday for Independence Day.
ECB Meeting
The ECB on July 7 will increase its benchmark rate to 1.5 percent from 1.25 percent, according to all 54 economists surveyed by Bloomberg News. ECB President Jean-Claude Trichet last week reiterated that policy makers are in a state of “strong vigilance,” a phrase he has used before tightening monetary policy.
“The bigger event on the agenda is the ECB,” said Robert Rennie, chief currency strategist in Sydney at Westpac Banking Corp., Australia’s second-largest lender. Comments by Trichet and other central bank officials suggest tightening of “25 basis points on Thursday and I think that’s something that continues to support sentiment towards the euro.”
ECB Governing Council member Ewald Nowotny said policy makers are struggling with a situation in which banks are willing to help stabilize Greece, while rating companies are applying “aggressive” rules. Standard & Poor’s said yesterday a bond-rollover plan drafted by French banks that serves as the basis for talks between investors and governments would qualify as a distressed exchange and prompt a “selective default” grade.
‘Stabilizing Greece’
“We have a somewhat strange situation,” Nowotny said in an interview with Austrian state television broadcaster ORF. “Some of the banks themselves are ready” to contribute to a new bailout package for Greece “because they are interested in stabilizing Greece,” he said.
U.S. payrolls climbed by 100,000 workers after a 54,000 increase in May that was the smallest in eight months, according to the median forecast of economists surveyed by Bloomberg News ahead of Labor Department data due July 8. The jobless rate probably held at 9.1 percent.
A net 27 percent of 782 New Zealand companies surveyed expect the economy to improve in the next six months, from a net 27 percent seeing a deterioration in the prior period, the New Zealand Institute of Economic Research said today.
“The survey number paints the picture of an economy that’s definitely on the recovery track and gaining momentum,” said Khoon Goh, head of market economics and strategy at ANZ National Bank Ltd. in Wellington. “The domestic fundamentals are supportive of the kiwi.”
New Zealand’s dollar rose 0.3 percent to 83.17 U.S. cents from 82.96 and earlier reached 83.32 cents, the most since the currency was freely floated in 1985. It bought 67.21 yen from 67.04 yen.
--Editor: Jonathan Annells
--Editor: Jonathan Annells
--Editors: Jonathan Annells, Naoto Hosoda
--Editor: Jonathan Annells
--Editor: Jonathan Annells
--Editors: Jonathan Annells, Rocky Swift --With assistance from Candice Zachariahs in Sydney.
Editors:
To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.
