By - Jan 13, 2011 9:46 AM GMT+0800
Jan. 10 (Bloomberg) -- Nick Bennenbroek, head of currency strategy at Wells Fargo & Co., talks about the outlook for the dollar and currency markets. Bennenbroek predicts the dollar will have about a 5 percent gain against the euro over the year and 11 percent versus the yen. He speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)
The euro traded near a one-week high against the yen on prospects European officials will intensify efforts to contain a sovereign-debt crisis, underpinning the appeal of the region’s assets.
The shared currency was also close to a one-week high versus the dollar on speculation Germany’s Finance Minister Wolfgang Schaeuble will reiterate tomorrow that the nation is ready to change the terms of Europe’s bailout fund. Australia’s dollar slipped after a government report showed employers added fewer jobs than economists predicted.
“There’s a sense that European leaders are going to step up their crisis response,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “This should provide ongoing support for the euro.”
The euro was at 109.05 yen at 10:14 a.m. in Tokyo from 109 yen yesterday in New York, after earlier touching 109.15 yen, the strongest since Jan. 6. It fetched $1.3124 from $1.3131 yesterday, when it reached $1.3145, the highest since Jan. 6. The dollar was at 83.1 yen from 83 yen.
The Australian dollar fell to 99.39 U.S. cents from 99.66 cents yesterday, when it dropped to 98.04 U.S. cents, the lowest level since Dec. 9. The currency was at 82.61 yen from 82.71 yen.
EU’s Rescue Fund
The euro rose the most against the yen in six weeks yesterday as German Chancellor Angela Merkel expressed her willingness to take whatever steps are necessary to stem the debt crisis.
“We’re saying what we’ve always said since the Greek crisis: We will stand by the euro,” she said yesterday.
Merkel was responding to remarks made by European Union Economic and Monetary Affairs Commissioner Olli Rehn, in which he called for a “comprehensive” plan to contain the sovereign debt crisis. His proposals included an expansion of the “size and scope” of the EU’s 440 billion-euro ($577 billion) rescue fund, the European Financial Stability Facility.
Spain will auction today as much as 3 billion euros of five-year bonds, while Italy will sell 6 billion euros of securities maturing in 2026 and 2015.
Portugal sold yesterday 599 million euros of bonds due in 2020 at a yield of 6.716 percent, compared with 6.806 percent at the previous auction Nov. 10.
“Worries about the debt crisis have eased a bit,” said Masahide Tanaka, a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest bank. “I don’t think people will become overly pessimistic again and sell the euro.”
Australian Dollar
Australia’s currency weakened against all of its major counterparts as the employment data increased speculation the central bank will refrain from raising interest rates.
Employment rose by 2,300 in December following a 54,600 increase in November, Australia’s statistics bureau reported today. Economists forecast a 25,000 gain. The jobless rate fell to 5 percent from 5.2 percent.
“The jobs data were much weaker than expected and pushed down the Aussie, while it’s pared losses due to an improvement in the jobless rate,” said Takuya Kawabata, a researcher in Tokyo at Gaitame.com Research Institute Ltd., a unit of Japan’s largest foreign-exchange margin company. “Concerns about flooding damage have weighed on the growth outlook and reduced the chance of rate increases.”
U.S. Data
The dollar traded near its strongest in almost a week versus the yen before a U.S. report that may show retail sales rose for a sixth month, adding to signs the recovery in the world’s largest economy is gaining traction.
Sales at U.S. retailers rose 0.8 percent in December, the same amount as in November, a separate Bloomberg News survey showed before the Commerce Department’s report tomorrow. Growth in the U.S. is expected to be unchanged at 2.8 percent in 2011 with strong domestic demand growth, though “the economy continues to deal with high unemployment and the shrinking of an overgrown housing sector,” the World Bank said in a report today.
“There are expectations that the U.S. economic recovery will persist,” said Marito Ueda, senior managing director at FX Prime Corp., a foreign-exchange margin company in Tokyo. “The bias is for the dollar to appreciate.”
The Dollar Index, which tracks the dollar against the currencies of six major U.S. trading partners such as the euro, rose 0.1 percent to 80.117 today.
To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.
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