The euro approached a seven-week high against the dollar after German business confidence fell less than some economists forecast, suggesting the region’s largest economy can withstand the sovereign-debt crisis.
The 17-nation currency climbed toward the strongest since July versus the yen after German Finance Minister Wolfgang Schaeuble said Germany and France will create a working group to enhance the region’s fiscal and monetary union. Sweden’s krona appreciated against all of its 16 major peers after retail sales increased more than forecast.
“The German data is helpful for the euro,” David Mann, regional head of research for the Americas at Standard Chartered in New York, said in a telephone interview. “It’s still one of the most mainly watched surveys in the euro zone.”
The euro rose 0.1 percent to $1.2527 at 9:19 a.m. in New York after climbing to $1.2590 on Aug. 23, the strongest level since July 4. The common currency gained 0.1 percent 98.57 yen after advancing to 99.18 yen on Aug. 21, the highest since July 5. The dollar was little changed at 78.70 yen.
U.K. financial markets are shut today in observance of the Summer Bank Holiday.
Schaeuble said the working group will prepare solutions in the areas of banking union and a strengthening of a fiscal union and monetary union. He spoke after meeting with French Economy and Finance Minister Pierre Moscovici in Berlin. Moscovici said the two states will work on “structural” solutions.
‘Decent Read’
German Chancellor Angela Merkel told officials in her coalition calling for a Greek exit from the euro to “weigh their words” as she signaled a renewed determination to keep the single currency intact.
The Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, dropped to 102.3 from a revised 103.2 in July. The lowest prediction in a Bloomberg News survey of 37 economists was for a decline to 101.
“Some in the market had expected a much worse report, and that’s why the euro gained some ground,” said Peter Rosenstreich, chief currency analyst at Swissquote Bank SA in Geneva. “The key number may be softer than expected, but it’s still a decent read, and is consistent with the economy that remains resilient. It’s not an absolute collapse.”
The euro has weakened 4.8 percent in the past six months, the worst performer among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes as Europe’s debt crisis worsened. The yen was the best performer, rising 5.3 percent, and the dollar appreciated 2.6 percent.
ECB President Mario Draghi may provide hints on future policy when he speaks at the Federal Reserve’s annual symposium in Jackson Hole, Wyoming, on Sept. 1. Fed Chairman Ben S. Bernanke will deliver a speech in Jackson Hole, on Aug. 31.
“There is scope for further action by the Federal Reserve to ease financial conditions and strengthen the recovery,” Bernanke wrote in a letter dated Aug. 22 to California Republican Darrell Issa, chairman of the House Oversight and Government Reform Committee.
Bernanke probably won’t use his speech to suggest a third round of bond buying, according to economists including Michael Feroli, chief economist at JPMorgan Chase & Co. in New York, and James O’Sullivan, chief U.S. economist for High Frequency Economics in Valhalla, New York.
Members of the Federal Open Market Committee, who meet next on Sept. 12-13, are closely monitoring unemployment and other data and have been divided about whether to spur expansion.
Euro Shorts
Futures traders cut bets the euro will weaken against the dollar, figures from the Washington-based Commodity Futures Trading Commission showed. The difference in the number of wagers by hedge funds and other large speculators on a decline in the European currency compared with those on a gain was 123,932 on Aug. 21, down from 137,810 a week earlier.
“The decrease in euro shorts indicates substantial expectations for some form of U.S. monetary easing,” said Makoto Noji, a foreign-exchange strategist at SMBC Nikko Securities Inc. in Tokyo.
The krona rose to the strongest level since February against the dollar as consumers helped to propel an expansion in the largest Nordic economy.
Retail sales climbed an annual 2.4 percent in July from a revised 1 percent the previous month, Statistics Sweden said. The krona has appreciated 8.4 percent against the euro this year as overseas investors sought safer assets.
The Swedish currency rose 0.4 percent to 6.5807 per dollar after appreciating to 6.5662, the strongest since Feb. 29. It gained 0.3 percent to 8.24209 versus the euro.
Hedge funds and large speculators are abandoning bets on a stronger dollar at the fastest pace ever amid growing confidence in the global economy.
Reversing Bets
Futures contracts favoring gains in the U.S. currency surged to the most on record in June as growth faltered and investors retreated from risky assets. Now, hedge funds are reversing those bets as central banks from China to the U.S. vow to stimulate their economies, prompting money managers to seek higher returns from Sweden to Australia.
Traders have less need for the relative safety of assets denominated in dollars as the cost of insuring sovereign bonds for Group of 10 and other nations tumbles to the lowest level in a year and stocks reach the highest since 2008.
