Aug. 13 (Bloomberg) -- The euro gained the most in a week versus the dollar as Italy sold the maximum amount of bills offered for sale, reducing concern nations in the currency block will not be able to access the debt markets.
Europe’s common fell earlier amid reports quoting European Central Bank Governing Council member Luc Coene as saying bond purchases won’t solve Spain’s and Italy’s difficulties. New Zealand’s dollar fell against the greenback after Finance Minister Bill English said the country would prefer a weaker currency. South Africa’s rand and Brazil’s real led declines against the dollar as reports showed slowing growth in Japan and the euro zone.
“The euro moved up on the back of the Italian auction,” said Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London. “The market looked at that as some confidence coming back into the periphery.”
The euro gained 0.6 percent to $1.2366 at 10:17 a.m. in New York, the biggest intraday gain since Aug. 3. It earlier fell 0.2 percent. The shared currency jumped 0.7 percent to 96.84 yen after slipping 1.1 percent last week. The yen was little changed at 78.30 per dollar.
Italy sold the 364-day bills at 2.767 percent, up from 2.697 percent at the last sale of similar-maturity debt on July 12. Investors bid 1.69 times the amount of bills sold, up from 1.55 times last month.
Bond Buying
The euro was 0.5 percent stronger against nine developed- nation currencies, according to Bloomberg Correlation-Weighted Indexes, the best one-day performance after Italy sold 8 billion euros ($9.9 billion) of Treasury bills. New Zealand’s and Australia’s dollars were the biggest losers with a 0.3 percent declines.
Spanish and Italian bonds rose and the euro gained earlier this month after ECB President Mario Draghi said the Frankfurt- based central bank may buy government debt in conjunction with euro-area bailout funds. The ECB later said it may take such measures only if troubled nations commit to improving their economies and fiscal positions.
Bond yields have been rising because financial markets don’t trust Spanish and Italian authorities to take the measures necessary to repair their economies, ECB’s Coene said in an interview with De Tijd and L’Echo published Aug. 11.
“If the periphery is going to come back at the top of the agenda, it’s going to be in September, when the ECB starts fleshing out the detail of its bond-buying program and markets start to press Spain and Italy to request help,” said Adam Cole, head of global currency strategy at Royal Bank of Canada Europe Ltd. in London. “There are all kinds of pressure points coming up.”
Brazil’s real fell 0.5 percent to 2.0262 per dollar and South Africa’s rand declined 0.5 percent to 8.1339 per dollar after a report of slowing growth in Japan.
The pace of economic growth in Japan cooled to an annualized 1.4 percent in the second quarter from a revised 5.5 percent in the first three months of the year, the Cabinet Office said in Tokyo today. The euro-area economy shrank 0.2 percent in the second quarter from the previous three-month period, according to the median estimate of analysts surveyed by Bloomberg before tomorrow’s data.
The Standard & Poor’s 500 Index fell 0.3 percent and the Stoxx Europe 600 Index was 0.2 percent weaker.
The implied volatility of three-month options on Group of Seven currencies declined, according to a JPMorgan Chase & Co. measure. The gauge dropped to 8.44, a level unseen since July 20, when it touched the lowest level since November 2007. Lower volatility makes investments in currencies with higher benchmark lending rates more attractive because the risk in such trades is that market moves will erase profits.
New Zealand
The so-called kiwi declined against most of its 16 major counterparts, falling 0.4 percent to 81.01 U.S. cents.
“We would prefer that the New Zealand dollar was a bit lower so we could get the rebalancing in the economy moving with a bit more momentum,” English said in Wellington today. “It’s a continued challenge for exporters to be profitable at 80 cents.”
The correlation between the currency and global stocks has fallen from record highs, according to data compiled by Bloomberg, and the relationship to raw material costs is also fading. Pacific Investment Management Co. and Kokusai Asset Management Co. are adding to bond holdings as New Zealand concentrates on containing inflation, keeping interest rates at least 2 percentage points higher than in the U.S. and the U.K.
