Euro firms, boosted by equity gains, German data

LONDON Wed Oct 31, 2012 5:46am EDT

A picture illustration shows U.S. 100 dollar banks and Japanese 10,000 yen notes taken in Tokyo August 2, 2011. REUTERS/Yuriko Nakao

A picture illustration shows U.S. 100 dollar banks and Japanese 10,000 yen notes taken in Tokyo August 2, 2011.

Credit: Reuters/Yuriko Nakao

LONDON (Reuters) - The euro rose on Wednesday, lifted as equity market gains helped perceived riskier currencies, and with direction likely to be determined by how Wall Street reopens after storm disruption.

Traders cited demand for euros from Middle Eastern investors and a supranational, while forecast-beating growth in German retail sales numbers for September, which rose at their fastest pace since June 2011, added to the single currency's appeal.

The euro rose 0.4 percent to $1.3014, its strongest in nearly a week. A sustained rise above $1.30 could see it target the October 25 high of $1.3023 and then the mid-October peak of $1.3140.

Comments by Minneapolis Federal Reserve Bank President Narayana Kocherlakota, who strongly defended the U.S. central bank's ultra-easy monetary policy, weighed on the dollar.

"The market is waiting to see how the U.S. market opens after Sandy. Equity futures are higher so people are expecting a positive opening," said Arne Lohmann Rasmussen, head of currency research at Danske Bank in Copenhagen.

"Over the next few months we think euro/dollar will break higher. We believe the market is underestimating the effect of the Fed's open-ended easing policy and tail risks will be priced out of the euro once Spain applies for a bailout," he said, adding he recommended buying euros on dips.

But traders said the euro's gains against the dollar may be limited due to expected month-end demand to buy dollars.

The euro remained hampered by uncertainty over when Spain may apply for a bailout, which would allow the European Central Bank to buy its bonds, and over whether Greece will agree to austerity and reforms.

This kept the single currency well within its $1.2800-$1.3200 range seen since mid-September.

Traders also said October surveys of manufacturing activity in China and the United States on Thursday, the monthly U.S. jobs report on Friday and the presidential election next week had the potential to whip markets around.

Euro zone finance ministers will hold a conference call on Wednesday to discuss progress in negotiations on the revised Greek bailout but are not expected to make any decisions yet, two euro zone officials said on Tuesday. <ID:L5E8LUIKK>

Near-bankrupt Greece needs to push through spending cuts and tax measures worth 13.5 billion euros ($17.52 billion) as well as a raft of reforms to appease EU and IMF lenders and secure bailout money needed to avoid running out of cash next month.

YEN DIPS

The yen fell, pulling away from a one-week high against the dollar and a two-week high versus the euro, paring gains made the previous day after the Bank of Japan eased monetary policy but not by as much as many were expecting.

The dollar was up 0.2 percent at 79.76 yen, recovering from a fall to 79.28 yen on Tuesday, with improved risk appetite weighing on the safe-haven Japanese currency.

The euro rose 0.5 percent to 103.67 yen, off Tuesday's low of 102.175 yen.

"If the global and domestic economy gets worse, the BOJ could take bolder steps, but at the same time the yen tends to rise as a currency of a creditor nation," said Taisuke Tanaka, FX strategist at Deutsche in Tokyo.

Greater appetite to take on risk also helped the higher-yielding Australian dollar rise 0.3 percent to $1.0384, while sterling was up 0.25 percent at $1.6113.

The Australian dollar was helped after Australia's central bank deputy governor Philip Lowe said on Tuesday the local currency was not fundamentally overvalued and set a very high bar for intervening to weaken it.

(Additional reporting by Hideyuki Sano in Tokyo and Ian Chua in Sydney, editing by Nigel Stephenson)

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Comments (1)
breezinthru wrote:
German retail sales are important but shouldn’t be important enough to change the direction of stock prices. China’s future purchases are what really counts and China is headed for trouble.

Oct 31, 2012 10:07am EDT  --  Report as abuse
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