By - Jan 13, 2011 9:55 PM 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 jumped after European Central Bank President Jean-Claude Trichet said inflation risks may increase and on optimism European leaders will take action to quell the region’s debt crisis.
The 17-nation currency gained for the fourth day against the dollar, strengthening versus all 16 of its most traded peers, as demand rose at a Spanish debt sale. The ECB kept its main interest rate at a record low. The franc declined after Swiss central bank Vice President Thomas Jordan said the currency’s renewed ascent is a threat to growth. The dollar slid after a report showed U.S. jobless claims rose.
“This chatter of action is probably going to provide some degree of support for the euro,” said Steve Barrow, head of research for Group of 10 currencies at Standard Bank Plc in London. “The market is minded to sell the Swiss franc in this less risk-averse environment.”
The euro appreciated 1 percent to $1.3266 as of 1:47 p.m. in London, after reaching $1.3268, the highest since Jan. 5. It jumped 1.2 percent yesterday, the most in a month. Against the yen, the euro advanced 0.6 percent to 109.66. The dollar slid 0.4 percent to 82.68 yen.
Europe’s single currency appreciated as much as 1.1 percent to 1.2836 Swiss francs, the most since Dec. 16, before trading at 1.2815.
Ministers Meet
The euro has rebounded from an almost four-month low of $1.2867 on Jan. 10 as speculation mounts that finance ministers meeting next week may increase the size of aid reserves and lower rates on bailout loans. It 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.
Spain sold 3 billion euros of bonds in its first debt auction of the year, meeting its maximum target. The Treasury sold the five-year bonds at an average yield of 4.542 percent, the Bank of Spain said, compared with 3.576 percent the last time the securities were auctioned on Nov. 4. Demand was 2.1 times the amount sold compared with 1.6 times at the previous sale. Italy sold 6 billion euros of bonds due in 2015 and 2026.
Spanish 10-year bonds rose a third day, pushing yields down 14 basis points to 5.34 percent.
The ECB’s Governing Council set the benchmark rate at 1 percent for the 21st month, as predicted by all 53 economists in a Bloomberg News survey.
To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net.
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.
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