Euro gains as ECB official says it isn’t overvalued; yen weakens

No Overvaluation

“Latest indicators don’t signal a serious overvaluation of the euro despite its recent appreciation” and “politicians should hold on to the established division of labor,” Weidmann said in a speech in Freiburg today. “An exchange-rate policy to specifically weaken the euro would lead to higher inflation in the end.”

Futures traders increased their bets that the euro will gain against the dollar, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on an advance in the euro compared with those on a drop -- so- called net longs -- was 37,952 on Feb. 5, compared with net longs of 27,472 a week earlier. That’s the most since April 2011.

“The euro is not really an overvalued currency at this stage,” Jane Foley, a senior currency strategist at Rabobank International in London, said in a radio interview on “Bloomberg -- The First Word” with Michael McKee. Rabobank forecasts that the euro will appreciate to $1.38 by the end of 2013.

G-7 Statement

The Group of Seven nations are considering releasing a statement on exchange rates this week to calm concern the world is on the brink of a currency war, three officials from G-7 countries said. The international finance group is looking to release it before a Feb. 15-16 meeting in Moscow of finance ministers and central bankers from the larger Group of 20.

The Japanese government will continue in its efforts to drive the Nikkei 225 Stock Average to 13,000 by the end of the fiscal year on March 31, Amari said two days ago, Kyodo reported. The Nikkei index closed at 11,153.16 last week. Japanese markets are shut today for a public holiday.

Asian Development Bank President Haruhiko Kuroda, stressing he was not speaking as a BOJ contender, said in an interview in Tokyo today that the Bank of Japan has “many” policy tools to achieve its 2% inflation target. Credit Suisse Group AG Chief Japan Economist Hiromichi Shirakawa has said Kuroda is “the leading candidate” to succeed current BOJ Governor Masaaki Shirakawa, who will step down on March 19.

‘Pumping Liquidity’

“The Japanese will stay committed to their current monetary policies,” said Brian Kim, a currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit in Stamford, Connecticut. “Amari is trying to do the whole reflation trade by pumping liquidity into the system. A by- product of that is going to be a push for stocks, and there’s likely to be yen weakness as a result.”

The yen’s inability to break key resistance from 94.06 to 94.13 may cause it to weaken to a support level at 91.98, then to 90.33, Cilline Bain, a London-based technical analyst at Credit Suisse AG, wrote today in a client note. Resistance refers to an area on a chart where sell orders may be gathered, and support is where there may be buy orders.

Bloomberg News

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