The euro traded at the highest level in more than 11 weeks against the pound ahead of a report on German business sentiment that may add to prove the recovery in the 16-nation region is gathering pace.
The euro also snapped two days of decline against the dollar on speculation the Ifo institute for Economic Research will say sentiment in Europe’s biggest economy improved this month. The Norwegian krone gained the most against the dollar, yen and euro as crude oil recovered from yesterday’s 3 per cent drop on renewed optimism for a revival in global demand.
“The positive German data should lend the euro support,” Ralf Umlauf, head of floor research at Helaba Landesbank Hessen-Thueringen in Frankfurt, wrote in a report today. The ZEW indicators have shown both current and future assessments improved and “we expect a similar scenario for the Ifo surveys,” he wrote.
The euro rose to $1.4329 as of 8:43 a.m. in London, from $1.4296 yesterday. Europe’s single currency was at 87.69 British pence after reaching 87.76 earlier, its highest level since June 8, from 87.45 in New York yesterday. The dollar was little changed at 94.17 yen. The yen was at 134.84 per euro, from 134.65 yesterday.
The Ifo institute in Munich will say its business climate index, based on a survey of 7,000 executives, increased to 89 from 87.3 in July, according to a Bloomberg News survey of economists. That would be the highest reading since October 2008. Ifo releases the report today.
‘Plus for economy’
“Business sentiment will probably improve, which is a plus for the economy,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow. “The euro may trade with a firm tone today, possibly targeting $1.4350.”
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European Central Bank President Jean-Claude Trichet said on August 22 there were “signs confirming that the real economy is starting to get out of the period of freefall.”
This “does not mean at all that we do not have a very bumpy road ahead of us,” he said.
Adding to signs the recession is easing, US orders for durable goods, those meant to last several years, probably jumped 3 per cent in July, reversing the previous month’s 2.5 per cent decline, according a Bloomberg News survey of economists. The Commerce Department releases the data today.
Financial losses
The yen climbed in early trading on concern financial losses will delay a recovery in the global economy, boosting demand for the currency as a refuge.
The Shanghai Composite Index rallied as much as 2.7 per cent after Ba Shusong, deputy director of the Development Research Center, an affiliate of the nation’s State Council, said in an interview with Shanghai Securities News that “moderately loose” monetary policy will stay in place in the short term to ensure a “stable recovery,” easing concerns that Chinese authorities may tighten lending.
China will be the first to recover from the global recession and has already passed the worst of its slump, Ba said, citing last quarter’s faster growth.
The government will meet targets for an 8 per cent expansion this year, Ba said, according to a transcript of the interview posted on the center’s website.
The dollar will continue to weaken this year as the global economy recovers from recession and investors seek currencies linked to growth, strategists said in a panel on Bloomberg Radio.
“Investors in the US and globally are sitting in too many T-bills and too much cash,” said Rebecca Patterson, global head of foreign exchange at JPMorgan Private Bank in New York. “As the world slowly gets better, they are going to want to take advantage of that. They want a better yield than you get in a T-bill, and that keeps the dollar under pressure.”
Norwegian Krone gains
The greenback may also depreciate as governments worldwide reduce the currency’s role in their foreign-exchange reserves, said David Wyss, chief economist at Standard & Poor’s, speaking at a conference in Sydney.
“It will still be the biggest reserve currency, but we will go back to a more normal distribution, back to more like what we had 10 or 15 years ago when the dollar was 70 per cent of reserves instead of 90 per cent of reserves,” he said today.
The Norwegian Krone rose to 6.0051 per dollar today, from 6.0501 yesterday, as oil, the nation’s biggest export earner, advanced 0.7 per cent to $72.55 a barrel on the New York Mercantile Exchange. The Swedish krona also strengthened to 7.0261, from 7.0676 yesterday.