BS: Euro Rises From Near Three-Month Low as Japan Plans to Buy Bonds
Jan. 11 (Bloomberg) -- The euro rose from almost a three- month low against the yen after Japan’s Finance Minister Yoshihiko Noda said it’s appropriate for his nation to buy euro- area government bonds to support Ireland.
The dollar advanced for the first time in three days versus the yen before a U.S. report this week forecast to show retail sales climbed for a sixth month in December. The 17-nation euro also gained versus the New Zealand dollar and the South African rand on speculation Japan’s bond purchases may help ease Europe’s sovereign-debt crisis.
“Some of the more aggressive shorts that might have been put on since the beginning of the year might have come undone as a result of this news regarding support of Japan for European government debt,” said Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London. “It’s good to know that there’s support there.” A short is a bet the price of an asset will fall.
The euro climbed 0.5 percent to 107.68 yen at 8:53 a.m. in New York, from 107.12 yen yesterday, when it reached 106.83, the lowest level since Sept. 14. The euro gained 0.1 percent to $1.2966, from $1.2951. The dollar rose 0.4 percent to 83.05 yen, from 82.71 yen.
Australia’s dollar fell against all of its major counterparts as rising floodwaters rushed toward the coastal city of Brisbane, where evacuations were under way.
‘Tragic Situation’
“The tragic situation with floods in Queensland may potentially weigh on growth,” said Jonathan Cavenagh, a currency strategist in Singapore at Westpac Banking Corp., Australia’s second-largest lender. “Until things settle down on that, we are not going to know the impact, but certainly it’s not positive on the local currency.”
The flooding has disrupted coal mine and rail operations, increasing concern the floods will impair resource exports that have driven economic growth in the South Pacific nation.
Australia’s currency fell 0.9 percent to 98.65 U.S. cents after sliding to 98.21 cents, the lowest level since Dec. 9. The currency slipped 0.4 percent to 82.03 yen.
The greenback rose versus the yen before a report expected to show the world’s largest economy is recovering.
U.S. retail sales climbed 0.8 percent last month, the same amount as in November, according to the median forecast of 80 economists in a Bloomberg News survey. The report from the Commerce Department is due Jan. 14.
Dollar Index
IntercontinentalExchange Inc.’s Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners including the euro and yen, was little changed at 80.887, compared with 80.881 yesterday.
The euro advanced 0.6 percent to NZ$1.7061 versus the New Zealand dollar and gained 0.4 percent to 8.8688 South African rand as Noda said Japan plans to buy bonds issued by Europe’s financial-aid funds, joining China in assisting the region as it battles against a debt crisis that prompted bailouts of Ireland and Greece.
Europe’s financial aid funds for distressed governments will sell bonds to raise as much as 34.1 billion euros ($44.2 billion) for Ireland in 2011 and 14.9 billion euros in 2012, the European Commission said last month.
“The fact that Asian investors are going to buy these bonds isn’t going to resolve the crisis in some of the countries,” Kenneth Broux, a senior market economist at Lloyds TSB Corporate Markets in London, said of the planned European debt. “The euro remains a sell on rallies.”
Portugal’s Yields
The sovereign-debt yields of Portugal may rise to levels that force the nation to follow Greece and Ireland in requesting a bailout from the European Union and the International Monetary Fund to avert default.
Portugal plans a 10-year sale tomorrow in the first bond auction by any of the euro region’s most indebted countries this year. Its existing 10-year debt has yielded more than 7 percent in 10 of the past 62 days, according to Bloomberg data. Greece needed a rescue within 17 days of its 10-year yield breaching 7 percent on April 6, while Ireland lasted less than a month after it cracked that level in October.
The yuan advanced as a report showed China’s foreign- exchange reserves climbed by a record last quarter and lending exceeded the government’s annual target, increasing pressure on the central bank to tighten policy to rein in inflation.
China’s currency appreciated 0.3 percent to 6.6180 per dollar in the biggest gain since Dec. 30, according to the China Foreign Exchange Trade System. Twelve-month non-deliverable forwards earlier rose 0.3 percent to 6.4440, reflecting bets the currency will strengthen 2.7 percent in a year.
--With assistance from Ron Harui in Singapore. Editors: Dennis Fitzgerald, Dave Liedtka
To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Lukanyo Mnyanda in London at lmnyanda@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
