The euro rose against the majority of its 16 most-traded peers after European Central Bank council member Jens Weidmann said the currency isn’t seriously overvalued.
The shared currency extended gains against the dollar after Weidmann, who heads Germany’s Bundesbank, warned governments against trying to weaken the euro. The yen approached the weakest since May 2010 vs. the dollar as Economy Minister Akira Amari was reported by Kyodo News as saying the government should persevere with efforts to boost stocks. Sweden’s krona strengthened amid a forecast for the Riksbank leave the benchmark rate unchanged.
“A lot of the move has to do with the Wiedmann comments,” Eric Viloria, senior currency strategist at Gain Capital Group LLC in New York, said of the euro in a telephone interview. “Comments from German officials might hold a little more weight because they represent the largest economy in the euro zone.”
The shared currency rose 0.4% to $1.3415 at 2:27 p.m. New York time after declining to $1.3325, the lowest since Jan. 24. The yen fell 0.8% to 93.42 per dollar after reaching 94.06 on Feb. 6, the weakest since May 5, 2010. Japan’s currency dropped 1.1% to 125.29 per euro.
The yen has dropped 20% in the past six months, the worst performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar has fallen 2.1% and the euro has added 7.9%, the biggest gain.
Nordic Currencies
The krona gained against all major counterparts before policy makers meet on Feb. 13, when they will leave the benchmark rate unchanged at 1%, according to a Bloomberg survey. Sweden’s currency appreciated 0.9% to 6.3906 per dollar and gained 0.5% to 8.5724 per euro.
The Norwegian krone added 0.6% to 5.5013 per dollar after a report showed a measure of inflation unexpectedly accelerated in January. Annual underlying inflation, which adjusts for taxes, fees and energy prices, picked up to 1.2% from 1.1% in December, Oslo-based Statistics Norway said.
Britain’s pound fell vs. all major counterparts after an industry report showed U.K. employment confidence declined in January and as traders cut bets the currency would strengthen. Sterling declined 0.8% to $1.5674 and 1.2% to 85.57 pence per euro.
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.
