Euro Rises as Crisis Optimism Boosts Demand, Krona Climbs
Wednesday, 28 March 2012 | 11:51
The euro approached a one-month high against the dollar after European leaders signaled rising confidence that their region’s crisis is near an end.
Europe’s shared currency advanced against 13 of its 16 major peers after Italian Prime Minister Mario Monti said the debt woes are “almost over.” Euro area finance ministers will meet in two days to weigh increasing the total capacity of Europe’s bailout fund. The yen strengthened amid speculation Japanese companies will repatriate overseas earnings before the end of the fiscal year on March 31. Sweden’s krona rose after data showed consumer confidence improved in March.
“Things have calmed down a bit regarding the debt crisis, and people are taking a more optimistic view,” said Lutz Karpowitz, a senior currency strategist at Commerzbank AG in Frankfurt. “The market knows it is going to get a bigger bailout fund. There is better risk sentiment,” which is boosting the euro, he said.
The 17-nation currency advanced 0.3 percent to $1.3347 at 10 a.m. London time, after climbing to $1.3386 yesterday, the highest level since Feb. 29. The euro was little changed at 110.65 yen, after erasing a decline of as much as 0.5 percent. The yen gained 0.4 percent to 82.88 per dollar.
Sweden’s krona advanced against all its major peers, rising 0.7 percent to 6.6419 per dollar.
Demand for the 17-nation euro was bolstered by speculation officials will discuss the prospect of combining the temporary European Financial Stability Facility and its permanent successor from July, the European Stability Mechanism at this week’s meeting in Copenhagen.
German Backing Possible
German Chancellor Angela Merkel said two days ago her country may back plans for Europe’s temporary and permanent rescue funds to run in parallel. Spanish and Italian government bonds rose.
“For the moment, the market is happy to hold the euro at relatively high levels on the basis that there’s not going to be an absolute financial crisis emanating from Europe,” said Derek Mumford, a director in Sydney at Rochford Capital, a currency risk management company. “Perhaps patience over the coming month will be tested.”
The euro has risen 0.6 percent this year according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The yen has fallen 10 percent, while the dollar has depreciated 2.7 percent.
The next resistance levels for Europe’s shared currency are around the highs posted at the end of February, of $1.3487, Ulrich Wortberg, an analyst at Helaba Landesbank Hessen- Thueringen in Frankfurt, wrote in an e-mailed note. The single currency should find support at $1.3300, he wrote. Resistance refers to an area where sell orders may be clustered, while support refers to a level where buy orders may be.
The yen strengthened amid speculation Japanese companies will repatriate overseas earnings before the end of the fiscal year on March 31.
“The yen move is driven by supply and demand before the final exchange-rate fixing of the fiscal year,” said Michiyoshi Kato, senior vice president of foreign-currency sales in Tokyo at Mizuho Corporate Bank Ltd., a unit of Japan’s second-largest bank by assets. “While there haven’t been a whole lot of orders from Japanese exporters to sell the dollar into the end of March, I think we’ll start to see some rise in demand to buy the yen.”
Major Japanese banks announce the yen fixing rate at 10 a.m. in Tokyo each day to their customers, based on the spot market at 9:55 a.m.
Sweden’s consumer confidence index rose to zero from minus 3.2 the previous month, the Stockholm-based National Institute of Economic Research said today. Economists predicted a reading of minus 2, according to the median of 14 forecasts in a Bloomberg survey.