By Candice Zachariahs and Monami Yui
Dec. 7 (Bloomberg) -- The euro rose against the majority of its
16 main counterparts amid speculation Europe will expand funds
available to the region’s most-indebted nations as leaders prepare to
meet in Brussels tomorrow.
The 17-nation euro snapped a three-day decline
versus the yen after the Financial Times reported yesterday that Europe
may combine temporary and planned permanent rescue facilities to bolster
its bailout resources. The European Central Bank is forecast to cut
interest rates tomorrow. Australia’s dollar rose against most major
peers after a report showed the nation’s economy grew faster than
estimated last quarter.
“Ahead of the summit, we are seeing a certain
expectation in the overall market that European policy makers will take a
step forward to resolve the debt crisis,” said Kengo Suzuki, manager of
the foreign-bond department in Tokyo at Mizuho Securities Co., a unit
of Japan’s third-biggest listed bank. “That’s giving some support to the
euro.”
The euro rose 0.3 percent to $1.3445 at 7 a.m.
London time. The common currency gained 0.3 percent to 104.49, after
falling 0.1 percent yesterday. The dollar was unchanged at 77.73 yen.
U.S. Treasury Secretary Timothy F. Geithner
yesterday backed a German-French push for closer European cooperation,
urging policy makers to work with central banks to erect a “stronger
firewall” to end the crisis. He welcomed “progress toward a fiscal
compact for the euro zone,” echoing language used last week by ECB
President Mario Draghi.
Rescue Funds
Operating the European Stability Mechanism in
combination with the 440 billion-euro ($590 billion) temporary fund next
year would potentially boost Europe’s anti-crisis resources to 940
billion euros. There were negotiations over pairing the two, according
to two people familiar with the discussions, Bloomberg News reported on
Oct. 20.
The ECB will reduce its benchmark rate to 1
percent from 1.25 percent on Dec. 8, according to the median estimate of
58 economists surveyed by Bloomberg News.
ECB Governing Council member Ewald Nowotny said
this week that the central bank is observing liquidity shortages in the
banking sector and can do more to supply funds.
The euro will rise to $1.37 by September 2012,
according to a Bloomberg survey of analysts. It has fallen 1 percent in
the past month, according to Bloomberg Correlation-Weighted Indexes
tracking the currencies of 10 developed markets. The yen has advanced
2.3 percent, the best performer, and the dollar has gained 1.8 percent
over that period, the data show.
Dollar Refuge
Losses in the dollar were limited on speculation
the euro area will need time to defuse its crisis and Japan will face
the risk of a credit-rating downgrade, increasing demand for the
greenback as a refuge.
Standard & Poor’s is “closer to a downgrade”
of Japan’s AA- rating, Takahira Ogawa, director of sovereign ratings at
S&P in Singapore, said last month. Japan-based Rating &
Investment Information Inc., which has rated the nation at AAA since
2000, said last week it may cut the ranking by year-end.
“The dollar would be your pick among G-3
currencies now, you can’t aggressively buy the euro because of the debt
crisis or the yen because of a possible downgrade of Japan’s sovereign
rating,” said Morio Okayasu, chief analyst in Tokyo at FOREX.com Japan
Co., a unit of the online currency trading firm Gain Capital in
Bedminster, New Jersey. “Concern over a slowdown in the U.S. economy has
receded.”
The so-called Aussie dollar advanced as signs of
resilience in the U.S. and Australian economies supported demand for
higher-yielding assets.
U.S. Data
The number of Americans claiming unemployment
benefits for the first time probably fell to 395,000 last week from
402,000, according to the median prediction of economists surveyed by
Bloomberg before the report tomorrow.
U.S. consumer sentiment will likely pick up this
month, according to another Bloomberg survey before the preliminary
Thomson Reuters/University of Michigan survey due on Dec. 9. Confidence
rose to 65.8 from 64.1 at the end of November, the data are forecast to
show.
“The brighter outlook for the U.S. economy is
also encouraging money flow into high-yield currencies like the Aussie,”
FOREX.com’s Okayasu said.
Australia’s statistics bureau said today
third-quarter gross domestic product increased 1 percent from the
previous three months, when it rose a revised 1.4 percent. That compared
with the median analyst estimate for a 0.8 percent gain.
RBA Rate Outlook
“The GDP data was strong and that is bullish for
the Aussie,” said Thomas Harr, head of Asian currency strategy Standard
Chartered Plc in Singapore. The market may “take back some of the
rate-cut expectations.”
The Reserve Bank of Australia yesterday lowered
the nation’s key interest rate to 4.25 percent from 4.5 percent in its
first cut at back-to-back meetings since 2009. Swaps traders are betting
on at least a percentage point of reductions within 12 months,
according to a Credit Suisse AG index.
The Aussie advanced 0.3 percent to 79.89 yen and $1.0280.
Indonesia’s rupiah weakened on speculation the
central bank hasn’t yet stepped in the foreign-exchange market to
strengthen the currency. Bank Indonesia plans to boost “intervention” in
the market to support the currency, Governor Darmin Nasution said Nov.
30, a day after the rupiah reached a 17-month low.
The rupiah declined 0.3 percent to 9,080 per dollar, according to prices from local banks compiled by Bloomberg.
--With assistance from Mariko Ishikawa in Tokyo and Khalid Qayum in Singapore. Editors: Naoto Hosoda, Jonathan Annells
To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
