Euro rises as German confidence increases; Aussie dollar weakens

‘Vulnerable’ Aussie

The Aussie fell for the third day against the dollar after Reserve Bank of Australia Governor Glenn Stevens said in a speech in Sydney yesterday that foreign-exchange intervention can be effective as long as it’s “judiciously used in the right circumstances.”

“The Aussie is looking very vulnerable,” said Ian Stannard, head of European foreign-exchange strategy at Morgan Stanley in London. “The RBA has once again focused in on the currency, citing it as overvalued. There are domestic and international reasons to be negative and we are looking for the move to continue.”

The Aussie fell 0.8% to 91.57 U.S. cents after touching 91.56, the weakest since Sept. 6. It has lost 2.3% since Nov. 15, poised for a fifth weekly drop, the longest such stretch since June.

The currency traded at NZ$1.1239 after touching NZ$1.1170, the lowest versus the New Zealand dollar since October 2008.

Kuroda Comments

Japan’s currency headed for a fourth weekly decline versus the greenback, the longest stretch since February, as Japanese bond yields fell to the lowest in two months relative to their U.S. counterparts.

Japan’s central bank kept its pledge at a policy meeting yesterday to expand the monetary base by as much as 70 trillion yen ($69 billion) a year to help spur inflation.

The yen isn’t “excessively weak,” Bank of Japan Governor Kuroda said in parliament today in Tokyo. Inflation will hit the BOJ’s 2% target in the latter half of the central bank’s two-year time frame and policy makers will adjust its bond- buying program as needed, he said.

The extra yield that U.S. 10-year Treasuries offer over similar-maturity Japanese bonds expanded to 2.19 percentage points on Nov. 20, the widest level since Sept. 12 based on closing prices. It was at 2.15% today.

The yen has tumbled 12% this year, the worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar strengthened 3.9% and the euro advanced 6.8%.

German Confidence

The Ifo institute’s German business climate index, based on a survey of 7,000 executives, increased to 109.3 from 107.4 in October. That was the highest reading since April 2012. Economists surveyed by Bloomberg forecast a gain to 107.7.

“This should help the euro to go higher,” said Neil Jones, head of European hedge-fund sales at Mizuho Bank Ltd. in London, referring to the German report. “Data continues to encourage, which is indicative of an improving economic trend throughout the euro zone.”

The Bundesbank said this week that the German economy remains on a “solid growth path.” Investor confidence rose to the highest level in four years in November, unemployment remained near a two-decade low in October and factory orders climbed more than economists predicted in September.

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