Tuesday, 17 September 2013

Euro Rises on German Confidence Data; Dollar Falls as Fed Meets

By Andrea Wong & Lukanyo Mnyanda - Sep 17, 2013 4:53 PM GMT+0400
The euro strengthened for a second day against the dollar and yen after an industry report showed German investor confidence climbed more than forecast, adding to evidence Europe’s largest economy is gaining momentum.
The dollar weakened against most of its major peers before Federal Reserve policy makers decide whether to reduce the pace of bond purchases at a two-day meeting starting today.India’s rupee fell the most in two weeks on speculation a reduction in U.S. stimulus may hurt demand for emerging-market assets.
Euro & U.S. Dollar
The dollar fetched $1.3335 per euro as of 8:17 a.m. in Tokyo, little changed from yesterday, when it touched $1.3386, the weakest since Aug. 28. Photographer: Chris Ratcliffe/Bloomberg
Sept. 17 (Bloomberg) -- Adarsh Sinha, head of Asia Pacific Group of 10 foreign exchange strategy at Bank of America Merrill Lynch, talks about the outlook for the euro. He also discusses the leadership change at the Federal Reserve, Reserve Bank of Australia monetary policy and the local currency. He speaks in Hong Kong with Mia Saini on Bloomberg Television's "First Up." (Source: Bloomberg)
“The German data has been helping the euro; Economic data has been stable enough to carry the currency,” Sireen Harajli, a strategist at Mizuho Bank in New York, said in a telephone interview. “People are staying on the sideline before the FOMC meeting. The Fed will probably reaffirm their forward guidance tomorrow that tapering isn’t tightening, interest rates are going to stay low.”
The euro advanced 0.2 percent to $1.3362 as of 8:50 a.m. New York time after reaching $1.3386 yesterday, the strongest level since Aug. 28. The dollar declined 0.1 percent to 99.19 yen while 17-nation currency rose 0.3 percent to 132.52 yen.
The euro has gained 4.7 percent this year, the best performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 3.3 percent, while the yen tumbled 11 percent.

Aussie Strength

Australia’s dollar advanced 0.4 percent to 93.57 U.S. cents after reaching 93.94 yesterday, the strongest since June 19. The New Zealand dollar climbed for a second day, gaining 0.6 percent to 82.21 cents. It touched 82.30 yesterday, the most since May 16.
The rupee fell for the first time in three days before the Reserve Bank of India meets to review policy on Sept. 20.
“Nobody really wants to take a view ahead of the Fed and RBI decisions,” said Vivek Chaturvedi, associate vice president for foreign exchange and derivatives at Ratnakar Bank Ltd. in Mumbai. “The rupee is in a delicate balance” after the recent gains, he said.
The rupee fell 0.8 percent to 63.37 per dollar, the biggest decline since Sept. 3. The currency has strengthened 3.7 percent this month.
The ZEW Center for European Economic Research said its index of German investor and analyst expectations, which aims to predict economic developments six months in advance, rose to 49.6 in September from 42 in August. That’s the highest level since April 2010.

Euro Economy

“This shows that the overall situation in the euro-zone economy is not that bad at all,” said Lutz Karpowitz, a senior currency strategist at Commerzbank AG in Frankfurt. “It should be supportive of the euro.”
The JPMorgan G7 Volatility Index fell for a fourth day to 9.02 percent, approaching the lowest in five weeks. It’s below the average 9.57 percent this year.
The Federal Open Market Committee will decide to slow its monthly bond purchases to $75 billion from $85 billion this week, according to the median estimate of economists in a Bloomberg News survey on Sept. 6.
“People have been paring their bets on Fed tapering, so we have seen the dollar on a softer footing,” said Michael Sneyd, a foreign-exchange strategist at BNP Paribas SA in London.
BNP still favors buying the dollar against other currencies with interest rates near zero such the Swiss franc and the yen, while expecting it to weaken against higher-yielding peers such the Australian and New Zealand dollars, Sneyd said.
The Bloomberg U.S. Dollar Index, which tracks the greenback against the performance of a basket of 10 major currencies, dropped 0.2 percent to 1,019.44 after falling to 1,017.30 yesterday, the lowest level since Aug. 12.
To contact the reporters on this story: Andrea Wong in New York at awong268@bloomberg.net; Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net