The euro strengthened against the dollar and yen after German factory orders unexpectedly increased in March, suggesting the region’s largest economy is starting to grow again.
The 17-nation currency rose against all except one of its 16 major peers as the German data damped speculation the European Central Bank will ease monetary policy further after President Mario Draghi said last week the ECB had an open mind about a negative deposit rate. Australia’s dollar fell to a two-month low against the greenback after the central bank cut interest rates to a record low. Sweden’s krona strengthened as industrial production exceeded economists’ forecasts.
“The German data was far better than expected,” said Jane Foley, senior foreign-exchange strategist at Rabobank International in London. “Today’s data suggests that we are another step away from them cutting the discount rate to negative territory.”
The euro gained 0.3% to $1.3114 as of 8:53 a.m. New York time after climbing to $1.3243 on May 1, the highest since Feb. 25. The single currency advanced 0.2% to 130.13 yen after dropping as much as 0.5%. The yen gained 0.1% to 99.23 per dollar.
The euro is likely to trade between $1.30 and $1.32 until “data gives us strong direction one way or another,” Rabobank’s Foley said.
German factory orders, adjusted for seasonal swings and inflation, increased 2.2% from February, the Economy Ministry in Berlin said. The median estimate in a Bloomberg News survey of economists was for a 0.5% decline.
ECB President Mario Draghi said yesterday that policy makers were ready to cut interest rates again if needed after reducing the main refinancing rate to a record 0.5% at their monthly policy meeting on May 2.
“We will be looking at all the data that arrives from the euro-area economy in the coming weeks and, if necessary, we are ready to act again,” Draghi said. Policy makers had an open mind on a negative deposit rate, he said last week.
The euro has risen 4.2% in the past six months, according to Bloomberg Correlation Weighted Indexes that track 10 developed-nation currencies. The dollar gained 1.2% and the yen slid 20%, the worst performer.