Euro rises most in 8 weeks as Draghi says economy to stabilize

The euro strengthened the most in eight weeks against the dollar after European Central Bank President Mario Draghi said data suggest the region’s economy will stabilize this year.

The 17-nation currency advanced for a second day versus the yen as ECB policy makers refrained from cutting their benchmark interest rate at a meeting today and Spanish borrowing costs declined at a bond auction. The pound rose against the dollar after the Bank of England left its asset-purchase program unchanged. The yen weakened against all its major counterparts as U.S. jobless claims unexpectedly declined, damping demand for haven assets.

“Draghi is more upbeat than what the market was expecting, given there was a chatter of a rate cut,” said Derek Halpenny, European head of global markets research at Bank of Tokyo- Mitsubishi UFJ Ltd in London. “In the near-term, the euro should stay above $1.30 and will possibly pop to $1.32 or $1.33,” he said.

The euro rose 0.9% to $1.3080 at 9:30 a.m. in New York time after gaining as much as 1%, the most since Jan. 10, when the ECB also held a policy meeting. The single currency advanced 1.3% to 123.58 yen. Japan’s currency weakened 0.4% to 94.48 per dollar.

The ECB kept its benchmark rate at a record low of 0.75% as forecast by 56 of 61 economists surveyed by Bloomberg News. Five predicted a reduction to 0.5%.

“Later in 2013 economic activity should gradually recover, supported by a strengthening global backdrop and our accommodative monetary policy stance,” Draghi said at a press conference in Frankfurt after the rate decision was announced. The euro’s exchange rate is not a policy target, he said.

Spanish Auction

The single currency strengthened in earlier trading after Spain sold 5.03 billion euros of bonds, surpassing its target of 5 billion euros. The Madrid-based Treasury auctioned 10-year securities at an average yield of 4.917%, down from 5.20% at the previous sale on Feb. 21.

The euro has appreciated 1.6% this year according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The dollar gained 2.6% and the yen slumped 6.7%.

The pound reversed earlier losses versus the dollar after the Bank of England’s Monetary Policy Committee held its asset- purchase target at 375 billion pounds ($565 billion), as forecast by 29 of 39 economists surveyed by Bloomberg. Ten predicted an expansion.

“Clearly not all members of the MPC are on the same page yet and some hawkishness remains,” said Neil Jones, head of European hedge fund sales at Mizuho Corporate Bank Ltd. in London, before the decision. “The pound will advance initially.”

The pound rose 0.2% to $1.5054 after dropping to $1.4967, the weakest level since July 2010. Sterling declined 0.6% to 86.89 pence per euro.

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