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Euro Strengthens Above $1.35 as Economic Confidence Jumps

Wednesday, 30 Jan 2013 09:40 AM

 

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The euro strengthened above $1.35 for the first time since December 2011 as a report showed economic confidence in the region improved this month more than analysts predicted.

The 17-nation currency advanced to its strongest level since May 2010 against the yen. It rose for a second day versus the dollar before a policy meeting at which Federal Reserve officials may restate their commitment to asset purchases, or quantitative easing. Norway’s krone fell for the third time in four days against the euro after the jobless rate unexpectedly increased.

“When we look at the economic data we have had a lot of positive surprises in the euro area,” said Niels Christensen, chief currency strategist at Nordea Bank AB in Copenhagen. “The Fed will keep the door open for more quantitative easing. That works out in favor of the euro.”

The euro gained 0.5 percent to $1.3555 at 11:07 a.m. London time after rising to $1.3563, the strongest since Nov. 22, 2011. The common currency advanced 1.2 percent to 123.81 yen after reaching 123.86, the highest since May 4, 2010. Japan’s currency dropped 0.6 percent to 91.30 per dollar and touched 91.41, the weakest since June 21, 2010.

An index of executive and consumer sentiment rose to 89.2 from a revised 87.8 in December, the European Commission in Brussels said today. That’s the highest since June. Economists had forecast an increase to 88.2, according to the median of 30 estimates in a Bloomberg News survey.

Recession Deepened

The euro rose even as a report showed Spain’s recession deepened in the fourth quarter more than forecast. The Madrid- based National Statistics Institute said today that gross domestic product fell 0.7 percent in the three months through December from the previous quarter, when it declined 0.3 percent. That is more than the 0.6 percent contraction the Bank of Spain predicted Jan. 23.

While “it still doesn’t look good in southern Europe,” other reports have signaled the region as a whole is stabilizing and the euro may climb to $1.37 by the end of March, Nordea Bank’s Christensen said. The median of 60 analyst predictions compiled by Bloomberg is $1.31.

Norwegian unemployment rose to 3.5 percent from a revised 3.3 percent in the previous period, Oslo-based Statistics Norway said today. The figure was above a 3.2 percent average forecast of eight economists surveyed by Bloomberg.

The krone slipped 0.3 percent to 7.4380 against the euro.

South Korea’s won weakened as a government minister said the country should consider taxes on currency trading to limit “speculative” inflows of capital.

The won fell 0.3 percent to close at 1,085.46 per dollar in Seoul.

The euro has gained 3 percent in 2013, the biggest advance among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar is little changed and the yen has fallen 5.7 percent.

© Copyright 2014 Bloomberg News. All rights reserved.

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