Euro rises to 7-month high vs. dollar; krona up on rate view

Riksbank Stance

The central bank reduced its benchmark rate by a quarter of a percentage point to 1 percent. The decision was predicted by all except one of 17 economists surveyed by Bloomberg. The Riksbank said it expects the rate to be at 1.1 percent in a year, versus an October forecast of 1.3 percent.

The euro climbed versus most of its 16 major counterparts after S&P lifted Greece’s long-term rating to B-, citing the completion of the nation’s distressed debt buyback and the determination of euro zone member states to preserve Greece’s membership in the currency bloc.

Gains in the shared currency may be limited as the 14-day relative strength index versus the dollar rose to 70.8. A reading of 70 indicates an asset’s value may have risen too far, too quickly and is due for a correction.

Annual View

The yen has lost 12.6 percent this year, the worst performer of the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar weakened 3.3 percent and the euro has dropped 1.2 percent.

The Japanese currency may decline to a 31-month low against the dollar, according to UBS AG. Breaking 84.20 per dollar could see the currency fall to 94.13 yen, the 38 percent Fibonacci retracement of the yen’s appreciation from June 2007 to October 2011.

Japan’s new leader told reporters he requested BOJ Governor Masaaki Shirakawa to agree on an accord with the 2 percent inflation target, instead of the current 1 percent goal, when the two met today.

The central bank will discuss setting a price target when policy makes meet, the Nikkei newspaper reported, without saying where it got the information. A final decision is expected to be made in January, according to the report.

“Fears that the new Abe government is going to announce something quite drastic are diverting flows into other currencies,” said Peter Frank, global head of currency strategy at Banco Bilbao Vizcaya Argentaria SA in London.

Bloomberg News

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