Bloomberg News

Euro Touches 1-Month High as Germany Approves Greek Deal

November 30, 2012

The euro rose to a more than one- month high against the dollar after German lawmakers approved Greece’s latest rescue package.

The yen slid to the weakest in seven months versus the shared currency after data showed Japan’s consumer prices stagnated in October, adding to speculation the central bank will increase stimulus to spur inflation. The euro held gains after House Speaker John Boehner criticized President Obama’s budget proposal and said “right now, we’re almost nowhere” on fiscal-cliff talks. Norway’s krone rose the most on speculation of a boost in interest rates.

“What we’ve seen at least over the course of this week is an ongoing improvement in European sentiment,” Vassili Serebriakov, a currency strategist at BNP Paribas SA in New York, said in a telephone interview. “Today’s news that Germany’s parliament approved a Greek deal is a positive development.”

The euro gained 0.1 percent to $1.2986 at 5 p.m. New York time after touching $1.3028, the strongest since Oct. 23. It extended its monthly gain to 0.2 percent. The yen depreciated 0.5 percent to 107.11 per euro after sliding to 107.67, the weakest level since April 23. It is down 3.6 percent this month. Japan’s currency fell 0.4 percent to 82.48 per dollar to increase its November drop to 3.3 percent.

Krone, Kiwi

Norway’s krone rose versus all of its major peers after the central bank Governor Oeystein Olsen said policy makers are concerned about rising housing prices in the medium term amid signs the country’s property market is overheating, creating speculation of an interest-rate increase.

The krone gained 0.2 percent to 7.3675 per euro after earlier falling 0.2 percent to 7.3933, the weakest since Nov. 1. The Norwegian currency strengthened 0.2 percent to 5.6733 per dollar.

New Zealand’s dollar declined as building approvals dropped 1.5 percent in October from the previous month, the statistics bureau said in Wellington today. The median estimate of economists surveyed by Bloomberg was for no change.

The so-called kiwi dropped 0.3 percent to 82.04 U.S. cents.

The Dollar Index fluctuated between gains and losses as lawmakers publicly debated their budget talks, rising and falling as much as 0.2 percent before ending little changed at 80.232.

Boehner said he’s willing to go forward in “good faith” and work with the president, adding that “real spending cuts” were needed in the deal and that he remained opposed to letting Bush-era tax cuts for the top 2 percent of wage earners.

Fiscal Cliff

Obama said that quick action by lawmakers to extend Bush- era tax cuts for middle-income Americans would give time for tougher negotiations on trimming spending to rein a budget deficit that has exceeded $1 trillion during each of the four years he’s been in office.

The debate has gained more urgency as the clock ticks down on the so-called fiscal cliff of more than $600 billion in tax increases and spending cuts scheduled to start taking effect in January.

The euro gained for a third day against the dollar as legislators in Germany’s lower house of parliament, or Bundestag, voted 473-100 to ratify an agreement forged among euro-area finance ministers on Nov. 27 to cut the rates on Greece’s bailout loans, suspend interest payments for a decade, give the country more time to repay and engineer a buyback of its bonds.

‘Strengthening Currency’

“Europe is looking like more of a comfortable destination for investors, and that’s playing out in terms of a strengthening currency,” Andrew Wilkinson, chief economic strategist at Miller Tabak & Co. in New York, said in a telephone interview.

Even as Europe moves ahead with its latest fix for Greece’s debt woes, 53 percent of 862 investors, analysts and traders who are Bloomberg subscribers said this week they think Germany’s economy will drop into a recession for the first time in more than three years. Sixty-four percent expect Europe’s debt turmoil to deepen again despite recent signs of calming in its financial markets.

The one-year, 25-delta risk-reversal rate for the euro reached minus 1.2975 percent today, the highest since October 2010, signaling reduced demand for the right to sell the common currency against the dollar. It was at minus 3.3425 percent at the beginning of this year.

The yen fell versus the majority of its 16 most-traded peers as Japan’s consumer prices excluding fresh food were unchanged in October from a year earlier after a 0.1 percent decline in September, the statistics bureau said in Tokyo today. The BOJ has an annual inflation target of 1 percent.

The yen is the biggest decliner this year among 10 developed-nation currencies tracked by Bloomberg Correlation- Weighted Indexes, falling 9.4 percent. It was followed by the dollar’s 2.1 percent drop and the euro’s 1.9 percent loss.

To contact the reporter on this story: John Detrixhe in New York at jdetrixhe1@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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