Euro Rises Toward 17-Month High Before ECB Meeting; Aussie Dollar Weakens

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From International Desk - International Currency News

The euro rose toward a 17-month high versus the dollar on speculation European Central Bank President Jean-Claude Trichet will signal at today s policy meeting he intends to raise interest rates this year to combat inflation.

The single currency snapped a two-day decline versus the yen before a German report that economists said will factory orders rose for a third month, adding to signs European growth is picking up. Australia s dollar fell for a fourth day after a government report showed retail sales unexpectedly declined in March. Asian currencies weakened as signs the U. S. recovery is stalling drove regional stocks lower.

Trichet will highlight inflation risks again and the links are commodity prices, energy prices and food prices, said Kurt Magnus, executive director of currency sales in Sydney at Nomura Holdings Inc. , Japan s biggest brokerage. We can see the euro eclipse the high of 2008 in the next three to six months, he said, referring to the July 2008 peak of $1. 6038.

The euro strengthened to $1. 4860 as of 2 p. m. in Tokyo from $1. 4827 in New York yesterday, when it climbed to $1. 4940, the highest level since December 2009. It was at 119. 44 yen from 119. 55 yen.

The yen advanced to 80. 43 per dollar from 80. 61, after touching 80. 42, the highest level since March 18 when the Group of Seven nations jointly intervened in an effort to weaken the Japanese currency.

Focus on Trichet

Trichet may indicate at the meeting just how fast he s prepared to raise rates over the coming months. Policy makers gathering in Helsinki will keep the benchmark at 1. 25 percent, according to all 48 economists surveyed by Bloomberg News. The ECB will boost the rate by 92 basis points in the next 12 months, according to a Credit Suisse Group AG index based on trading in swaps.

The focus for Thursday is on the ECB meeting and whether or not Trichet uses the code word vigilant, analysts at BNP Paribas SA including Ray Attrill, a senior currency strategist in New York, wrote in a note yesterday. We expect the ECB to maintain a hawkish tone pushing euro to $1. 5050.

German factory orders, adjusted for seasonal swings and inflation, gained 0. 4 percent in March from February when they rose 2. 4 percent, according to a Bloomberg survey ahead of today s data.

Europe s currency has risen 1. 3 percent over the past month in a measure of foreign-exchange rates of 10 developed nations, according to Bloomberg Correlation-Weighted Currency Indexes. The dollar has weakened 3. 5 percent.

Aussie Falls

Japan s financial markets are shut today for a national holiday. Markets are likely to experience continued uncertainty amid sharp price falls and consolidation of recent gains, Darryl Conroy, financial markets analyst in Brisbane at Suncorp-Metway Ltd. , wrote today in a note to clients.

Australia s dollar fell for a sixth day versus the yen after the Bureau of Statistics said retail sales fell 0. 5 percent in March from February, the first drop in five months. The median forecast in a Bloomberg survey of economists was for a 0. 5 percent gain, and none saw a decline.

These data continue to point to the RBA remaining on hold, said David Forrester, a currency economist at Barclays Capital in Singapore. At the moment the market is a little worried about a slowing in global growth so that s weighing a bit on the Aussie.

Australia s dollar fell 0. 2 percent to $1. 0730, and declined 0. 4 percent to 86. 28 yen.

Asian Currencies

Asian currencies were led lower by Malaysia s ringgit and Singapore s dollar as regional stocks fell on concern U. S. economic growth is cooling.

Regional shares slid after reports from the U. S. yesterday showed service industries expanded at the slowest pace in eight months and companies added fewer jobs that forecast.

Global risk sentiment is being driven by recent economic data that may favor safe-haven currencies in the very short term, said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd. in Singapore. Asian currency markets may consolidate in a tight range ahead of non-farm payrolls data tomorrow.

The ringgit weakened 0. 4 percent to 2. 9880 per dollar, and Singapore s currency dropped 0. 2 percent to S$1. 2309. The Indonesian rupiah fell 0. 2 percent to 8,568.

The MSCI Asia Pacific Excluding Japan Index slipped for a third day, losing 0. 2 percent.

Courtesy: Bloom Berg


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