Bloomberg News

Euro Rises to 10-Week High on German Growth Signs; Dollar Falls

September 07, 2012

The euro strengthened to an 10-week high against the dollar after German reports showed exports and industrial production increased in July, boosting demand for the region’s currency.

The 17-nation euros extended a fourth weekly gain versus the yen amid speculation a bond-purchase program announced by the European Central Bank yesterday will help contain the area’s debt crisis. The dollar fell against most of its major counterparts before a U.S. monthly payroll report today, after industry data yesterday showed American companies hired more workers last month than economists forecast. The Swiss franc fell to the weakest since March against the euro.

“There’s increased positivity in Europe,” said Paul Robson, a senior currency strategist at Royal Bank of Scotland Group Plc in London. If payrolls are “a good number, the market will reduce its expectation of QE and we get a more positive dollar,” he said, referring to the Federal Reserve’s bond purchases known as quantitative easing.

The euro strengthened 0.4 percent to $1.2678 at 6:15 a.m. New York time after rising to $1.2691, the strongest since June 29. The common currency advanced 0.6 percent to 100.19 yen. It has gained 1.7 percent this week. The dollar was little changed at 78.92 yen.

German exports rose 0.5 percent from June, when they fell a revised 1.4 percent, the Federal Statistics Office said. Economists forecast a 0.5 percent decline, according to a Bloomberg survey. Industrial production climbed 1.3 percent from June, when it fell a revised 0.4 percent, the Economy Ministry said in Berlin.

‘Some Support’

ECB President Mario Draghi said yesterday the central bank will target government bonds with maturities of between one and three years to help contain borrowing costs. Purchases will be fully sterilized, meaning the impact on money supply will be neutral, and the ECB will not have seniority, he said.

“The ECB’s decision is likely to lend some support to the euro,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp. (8711), a currency-margin company.

The Stoxx Europe 600 Index (SXXP) of shares advanced 0.5 percent, and futures on the Standard & Poor’s 500 Index rose 0.4 percent. Spanish and Italian bonds advanced.

The euro has strengthened 0.9 percent in the past week, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen declined 0.9 percent, and the dollar was little changed.

Dollar Index

The Dollar Index (DXY) declined for a third day before today’s U.S. jobs report.

American employers hired 130,000 workers last month, after adding 163,000 in July, according to a Bloomberg News survey before the Labor Department data. Companies created 201,000 jobs in August, ADP Employer Services said yesterday, exceeding the 140,000 gain forecast by economists in another Bloomberg survey.

Fed Chairman Ben S. Bernanke has said the lack of employment growth is a “grave concern.” The central bank next meets to review policy on Sept. 12-13.

“There’s a good chance the Fed will announce QE3 this month,” said Noriaki Murao, a managing director in New York at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s biggest financial group by market value. “With lingering expectations of Fed stimulus, the dollar would be on the back foot.”

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against those of six U.S. trading partners, dropped 0.2 percent to 80.899.

The franc declined for a fifth day against the euro as demand for safer investments waned.

The Swiss currency weakened 0.7 percent to 1.2130 per euro after depreciating to 1.2143, the weakest since March 14.

The Swiss National Bank placed a cap of 1.20 per euro on the franc in September 2011 to limit its strength after investors turned to the currency as a haven from the euro- region’s debt crisis.

To contact the reporter on this story: David Goodman in London at dgoodman28@bloomberg.net

To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net


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