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Euro Has Longest Stretch of Monthly Gains in Decade

Thursday, 31 Jan 2013 01:38 PM

 

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The euro gained for sixth straight month against the dollar, the longest winning streak in almost a decade, as risk appetite improved amid speculation the worst is over in the currency bloc’s sovereign-debt crisis.

The 17-nation currency reached the highest level since November 2011 Thursday as it fluctuated after data showed drops in German retail sales and unemployment.

The Dollar Index was poised for a second monthly loss as a U.S. report showed jobless claims increased more than forecast last week. The yen fell against the euro and dollar, while South Africa’s rand rose against all of its 16 most-traded peers.

“The big trend of what’s happening is a gradual unwinding of bearish euro positioning over the last month or two,” Dan Dorrow, head of research in Stamford, Connecticut, at Faros Trading LLC, said in a telephone interview. “That’s what’s been pushing up the currency a lot.”

Declassified: ‘Financial War’ Could Wipe Out 50% of Your Wealth’

The euro touched $1.3594, the highest level since Nov. 18, 2011, before trading at $1.3584 at 1:03 p.m. New York time. It lost 0.2 percent earlier.

Europe’s common currency gained 0.4 percent to 124.09 yen and touched 124.16, the strongest since May 2010. It fell earlier to 122.99 yen. The dollar rose 0.3 percent to 91.35 yen.

The shared currency has gained 3 percent in January against the greenback, the most since October 2011. It hasn’t strengthened for six consecutive months since May 2003. The euro has climbed 8.4 percent versus the yen in January.

Rand Rallies

The South African rand climbed after producer inflation data was lower than forecast and the nation’s monthly trade deficit narrowed in December.

Producer prices were unchanged at 5.2 percent, versus a 5.5 percent estimated in a Bloomberg survey, and the trade gap decreased to 2.7 billion rand ($303 million), from 7.9 billion the previous month.

The rand appreciated 1.1 percent to 8.9407 per dollar after weakening 0.4 percent earlier.

The Malaysian ringgit slid the most this week since May, a 2 percent drop, on speculation Prime Minister Najib Razak will call an early general election that may weaken the coalition’s grip on power. It declined 0.8 percent to 3.1060 after earlier touching 3.1148, its lowest since Sept. 7.

New Zealand’s dollar rose against most major peers after the nation’s central bank said it expects the economy to grow this year. The kiwi, as the currency is nicknamed, gained 0.4 percent to 83.95 U.S. cents and rose 0.7 percent to 76.69 yen.

Best Performer

The euro has been the best performer this year among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes, gaining 2.9 percent. The yen weakened 5.6 percent, and the dollar declined 0.3 percent.

Economic confidence in the euro area rose more than economists forecast in January, data showed, adding to signs that the currency bloc may be emerging from a recession.

European Central Bank President Mario Draghi said last week the “darkest clouds” over the region have lifted due to decisive policy steps last year.

German unemployment unexpectedly declined in January, data showed today, adding to signs a pick-up in Europe’s largest economy is gathering pace.

The number of people out of work fell a seasonally adjusted 16,000 to 2.92 million, the Nuremberg-based Federal Labor Agency said. Economists in a Bloomberg News survey predicted an increase of 8,000.

A separate report the Federal Statistics Office showed German retail sales adjusted for inflation and seasonal swings dropped 1.7 percent from November, when they rose 0.6 percent.

Relative Strength

The shared currency may be due to reverse course, according to a technical indicator. The euro’s 14-day relative strength index versus the dollar and the yen was above 70, a level that may signal an asset has rallied too far, too quickly.

“No one really believes it’s a massive, sustainable recovery” in Europe, said Shant Movsesian, a foreign-exchange strategist at 4Cast Ltd. in London. “We’ll get a lot of ups and downs” and the euro will probably stay around current levels for the rest of the quarter, he said.

A gauge of currency volatility declined, decreasing the chance that price swings will wipe out profits. The JPMorgan G7 Volatility Index, based on three-month futures options on Group of Seven nations’ currencies, reached 8.66 percent, after touching a five-month high of 9.19 percent Jan. 18.

The reading was close to the index’s 200-day moving average of 8.69 percent. Moving averages are seen by some traders as potential turning points.

The Dollar Index headed for its biggest monthly drop since September after the Federal Reserve said following a two-day meeting that it will keep buying Treasuries and mortgage bonds to spur the U.S. economy and reduce unemployment.

Fed Purchases

The Fed repeated that its purchases, divided between $40 billion a month of mortgage-backed securities and $45 billion a month of Treasury securities, will continue “if the outlook for the labor market does not improve substantially.”

The dollar gauge, which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, has dropped 0.7 percent this month to 79.180. It declined 0.1 percent today.

Initial jobless claims in the U.S. rose 38,000 in the week ended Jan. 26, the most since Nov. 10, to 368,000, the Labor Department reported. Economists forecast 350,000 filings, according to the Bloomberg survey median. The increase followed a combined 45,000 drop in the prior two weeks.

The jump “shouldn’t raise any red flags because a lot of it is attributed to some of these seasonal fluctuations,” Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pa., said before the report. “It doesn’t suggest the labor market’s deteriorating.”

Declassified: ‘Financial War’ Could Wipe Out 50% of Your Wealth’

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