Euro Declines as Officials Discourage Gains Before G-7 Meeting
By Stanley White and Ron Harui
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Oct. 9 (Bloomberg) -- The euro declined to the lowest in more than two weeks against the dollar and fell for a second day against the yen as European finance ministers said their currency is appreciating too quickly.
Luxembourg Prime Minister Jean-Claude Juncker said yesterday the euro's 11.3 percent gain against the dollar over the past year is more than enough to reduce global trade imbalances. The euro fell against 11 of the 16 most-active currencies before officials hold a second day of meetings today and the Group of Seven industrialized nations convene in Washington on Oct. 19.
``European officials appear to be worried that the pace of the euro's appreciation is too fast,'' said Nobuaki Tani, a client manager of the Market Trading Office at Resona Bank Ltd. in Tokyo. ``They're considering what it may do to exports. The euro is being sold.''
The euro fell to $1.4016, the lowest since Sept. 20, before trading at $1.4021 at 1:53 p.m. in Tokyo from $1.4048 late yesterday. Against the yen, it weakened to 164.24 from 164.96. Europe's single currency may decline to $1.3950 and 163.90 yen today, Tani forecast.
European Central Bank President Jean-Claude Trichet, who urged politicians on Oct. 4 to show more ``verbal discipline'' when discussing currencies, will speak before the European Parliament today in Brussels. ECB policy makers Miguel Angel Fernandez Ordonez and Gertrude Tumpel-Gugerell will also give speeches.
The common European currency reached a record of $1.4283 on Oct. 1 and an all-time high of 168.99 yen on July 23. Juncker also said after the meeting in Luxembourg that U.S. authorities have reaffirmed their support for a ``strong dollar.''
Asian Currencies
The yen rose against all 16 most-active currencies after Juncker said yesterday investors should take into account Japan's economic recovery and that China should allow the yuan to strengthen.
The yen gained 0.4 percent against the British pound to 238.11. It rose the same amount against the Australian dollar to 104.49 and to 118.55 against Canada's currency.
``European officials are now expressing concern that the yen is too weak,'' said Hiroshi Yoshida, foreign-exchange trader at Shinkin Central Bank in Tokyo. ``There's a sense of caution about what G-7 officials will say about the yen. The natural reaction is to push it higher.''
The yen rose to 117.14 per dollar from 117.41. It may climb to 164 per euro and 116.70 per dollar today, Yoshida said.
No Reason
Gains in the yen may be curbed [gezügelt] by speculation the Bank of Japan will keep interest rates unchanged at this week's meeting on signs of persistent deflation.
``There's no reason for a rate hike when consumer prices are falling,'' said Ryohei Muramatsu, manager of Group Treasury Asia at Commerzbank in Tokyo. ``The yen may weaken'' to 117.70 versus the dollar and 165.15 per euro today, he forecast.
[Na hoffentlich, ich will CHF zu 1,6680 kaufen und brauch eine Steilvorlage vom Yen...- A.L.]
A government report last month showed consumer prices fell for a seventh month in August. The Bank of Japan will maintain the key overnight lending rate at 0.5 percent at the conclusion of a two-day meeting on Oct. 11, according to all 39 economists surveyed by Bloomberg News.
Investors see a 2 percent chance the central bank will raise rates, down from 5 percent a week ago, according to Credit Suisse Group calculations based on interest payments.
The dollar also rose to the highest in more than two weeks against the euro on speculation the Federal Reserve won't lower interest rates this month. It has risen 1.9 percent from an Oct. 1 record low as traders pared bets the Fed will follow last month's half-percentage-point rate cut with another reduction.
Perform Better
Job creation exceeded expectations last month and August data were revised to a gain from a loss. U.S. government reports this week will show a rebound in inflation and retail sales, according to Bloomberg surveys. The Fed will release the minutes of last month's meeting at 2 p.m. in Washington.
``There are factors looming on the horizon that might see the dollar perform better this week,'' said Sue Trinh, a currency strategist at RBC Capital Markets in Sydney. ``Rate expectations have become less bearish since the revision to the payroll figures.''
The dollar may gain to $1.40 per euro and 118 yen over the next 24 hours, Trinh said.
Interest-rate futures traded on the Chicago Board of Trade suggest a 48 percent chance the Fed will cut the target rate for overnight lending between banks a quarter-point on Oct. 31, down from 74 percent a week ago.
The dollar rose to 89.31 U.S. cents per Australian dollar, recovering from a 23-year low of 90.33 cents. Against the New Zealand dollar, it was at 76.22 U.S. cents, above a two-month low of 76.74 cents.
The New York Board of Trade's dollar index, measuring its value against a basket of six major currencies including the euro and yen, rose 0.1 percent to 78.784 today. It declined to 77.657 on Oct. 1, the lowest since the index started in March 1973.
To contact the reporter on this story: Stanley White in Tokyo at swhite28@bloomberg.net ; Ron Harui in Singapore at rharui@bloomberg.net ;
Last Updated: October 9, 2007 00:54 EDT |
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