The euro rose to its strongest versus the dollar since December 2011 after exceeding a technical level amid increasing appetite for risk.
The 17-nation currency appreciated as European stocks reached the highest in almost two years as optimism rose that fiscal turmoil in the region is easing. The greenback fell versus most of its 16 major peers as investors pared bets the Federal Reserve will signal a change to its asset-buying program at the end of a two-day meeting tomorrow. South Africa’s rand rallied versus the dollar from the weakest in almost four years.
“It’s breaking through some technical levels,” Fabian Eliasson, vice president of corporate foreign-exchange sales at Mizuho Financial Group Inc. in New York, said of the European currency in a telephone interview. “Just an overall risk-on type of trade. The euro is the story at the moment, pushing up at these levels.”
The euro touched $1.3496, the strongest level in almost 14 months, before trading at $1.3483 at 1:41 p.m. in New York, up 0.2 percent. The shared currency was little changed at 122.26 yen. The greenback weakened 0.2 percent to 90.69 yen after touching 91.26 yesterday, the strongest since June 2010.
The European currency tested a resistance level at $1.3493, which is the 50 percent Fibonacci retracement of the shared currency’s drop versus the dollar from May 2011 to July 2012, Richard Adcock, a technical strategist at UBS AG in London, wrote today in a client note. Resistance is an area on a chart where sell orders may be clustered. Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a new high or low.
The euro gained 1.1 percent against the dollar last week as the European Central Bank said financial institutions will repay more of its loans than forecast, spurring optimism the worst of the region’s three-year-old debt crisis is over. The Stoxx Europe 600 Index climbed to 290.45 in London today, the highest level since February 2011.
South Africa’s rand rose versus most major peers, rebounding from its weakest level in almost four years against the dollar as investors bet the decline had gone too far. The currency appreciated 0.8 percent to 9.0355 per dollar. It fell to 9.1604 yesterday, the least since April 2009.
Japan’s currency gained versus the dollar as a report showed confidence among U.S. consumers dropped more than forecast in January to the lowest level in more than a year.
“What we’re seeing is a little profit-taking,” Mike Moran, a senior currency strategist at Standard Chartered Plc in New York, said in a telephone interview. “To expect dollar-yen to go in a straight line to 100 or 105 is not realistic.”
The yen rose earlier versus the dollar as investors reduced wagers it would keep falling after sliding for the past 11 weeks in the longest losing streak on record.
Japan’s currency fell 6.1 percent over the past month in the worst performance among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro gained 2 percent, while the dollar declined 0.2 percent.
The Federal Open Market Committee will issue a policy statement tomorrow after its two-day meeting. Minutes of the committee’s December session showed participants were “approximately evenly divided” between those who said it would be appropriate to end its third round of asset purchases, known as quantitative easing or QE3, around mid-2013 and those who thought the buying would need to continue beyond that.
“The groundbreaking meeting was December, and they’ll be in a holding pattern through January, so I don’t think we’ll get any fresh drivers from the meeting tonight,” said Daragh Maher, a strategist in London at HSBC Holdings Plc.
The Conference Board’s index of U.S. consumer confidence decreased to 58.6, the weakest since November 2011, from a revised 66.7 in December, figures from the New York-based private research group showed today.
“From today onward, we’ll get a series of weaker data prints” from the U.S., said Kiran Kowshik, a currency strategist at BNP Paribas SA in London. “Our preference is to continue selling the dollar on rallies. We expect a minimal change in the Fed statement.”
The ADP Research Institute is scheduled to release January company hiring numbers tomorrow, followed by a government report on fourth-quarter gross domestic product.
The New Zealand dollar rose for the first time in four days against its U.S. counterpart after the statistics bureau said the annual trade deficit narrowed to NZ$1.21 billion ($1 billion) in the 12 months ended December, compared with a revised NZ$1.39 billion shortfall in the year through November.
The kiwi, as the currency is nicknamed, appreciated 0.4 percent to 83.75 U.S. cents after falling 1 percent in the previous three days.
Sterling rose for the first time in four days against the euro, appreciating 0.2 percent to 85.59 pence.
U.K. currency-trading volumes fell to an average $1.92 trillion a day in October, 5 percent lower than six months earlier, the Bank of England said, citing its twice-a-year surveys for the Foreign Exchange Joint Standing Committee.
Average currency-trading volumes in the U.S. declined to $794 billion a day in October from $860 billion in April, the Federal Reserve Bank of New York said.