The euro held a gain from last week vs. the dollar after a report showed manufacturing in the 17-nation currency bloc contracted at a slower pace than initially estimated in May.
Europe’s shared currency pared an intraday advance after Federal Reserve Bank of San Francisco President John Williams said the central bank’s asset-purchase program has the potential to end this year. Norway’s krone, Sweden’s krona and South Africa’s rand rallied on data showing manufacturing in the three nations expanded last month. Turkey’s lira slid following a weekend of violent protests.
“The surprise in the euro-region data is lending support to the euro,” said Kasper Kirkegaard, a senior currency strategist at Danske Bank A/S in Copenhagen. “At the moment it only takes little news to send the euro higher against the dollar because the market is very long dollars.”
The euro was little changed at $1.30 at 9:09 a.m. New York time. It reached $1.3061 on May 30, the strongest level since May 9. Europe’s shared currency gained 0.4% to 1.2470 Swiss francs and fell 0.3% to 130.27 yen. Japan’s currency strengthened 0.2% to 100.27 per dollar.
The euro will trade at about $1.30 for the next three months, before dropping to $1.27 by the end of the year, Kirkegaard predicted.
The euro-area manufacturing index increased to 48.3 last month from 46.7 in April, London-based Markit Economics said today. That’s above an initial estimate of 47.8 on May 23. It has been below 50, indicating contraction, since July 2011.
“There are a few signs of a possible stabilization,” European Central Bank President Mario Draghi said in a speech in Shanghai today, according to text provided by the Frankfurt- based ECB. “Our baseline scenario continues to be one of a very gradual recovery starting in the latter part of this year.”
After reducing the ECB’s benchmark interest rate to a record-low 0.5% last month, Draghi signaled he’s prepared to cut again if economic data worsen. The ECB’s Governing Council will leave borrowing costs unchanged when it meets on June 6, according to 56 of 58 economists in a Bloomberg survey.
Norway’s krone advanced versus most of its 16 major peers after a purchasing managers index climbed more than economists forecast in May. Sweden’s krona strengthened as a separate index of manufacturing jumped.
The krone advanced 0.2% to 5.8560 per dollar while Sweden’s krona also climbed 0.3%, to 6.6025 per dollar.
The euro appreciated 3.2% this year, in a basket of 10 developed-market currencies tracked by Bloomberg Correlation- Weighted Indexes. The yen slumped 10.7%, the biggest drop, and the dollar rose 4.9%, the largest advance.
The dollar pared today’s decline after Williams said in Stockholm that the Fed may start reducing its bond-purchasing program by the “summer” and potentially end quantitative easing by year end.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against currencies of six U.S. trading partners, was 0.2% lower at 83.234, after depreciating as much as 0.5% before his comments.
The Turkish lira was the biggest loser among 31 currencies against the greenback on concern days of protest against Prime Minister Recep Tayyip Erdogan will undermine his efforts to overhaul the political system.
The lira depreciated 1.1% to 1.8958 per dollar.
South Africa’s rand appreciated at least 0.2% against all 16 of its major peers after a report showed manufacturing unexpectedly expanded in May. The gauge fell to 50.4 in May, from 50.5 in April. The median estimate of economists in Bloomberg survey was for a decline to 49.9.
The currency of Africa’s biggest economy added 1.1% to 9.9833 per dollar from May 31, when it touched 10.2847, the weakest level since March 2009.
The Swiss franc weakened against its 16 major counterparts. Swiss National Bank President Thomas Jordan said the franc remained strong even after recent declines, according to an interview with the Schweiz am Sonntag published yesterday.