FOREX-Euro climbs for 2nd day on upbeat German data

Wed May 8, 2013 12:08pm EDT

Related Topics

* Positive risk environment also helps lift euro
    * Norway's central bank keeps rates steady
    * RBNZ says intervened in FX market

    By Gertrude Chavez-Dreyfuss
    NEW YORK, May 8 (Reuters) - The euro advanced against the
dollar for a second straight session on Wednesday, touching
one-week highs, as an unexpected rise in German industrial
output pared back prospects of a near-term interest rate cut in
the euro zone.
    Wednesday's data followed another upbeat German industrial
orders report on Tuesday, helping euro sentiment overall, while
falling borrowing costs in peripheral euro zone countries have
also recently lent support to Europe's common currency. 
    Further easing from the European Central Bank was still a
possibility, however, particularly in the wake of ECB President
Mario Draghi's statements on Monday about how a rate cut was
still an option if economic data weakens significantly.
 
    But for now, BNP Paribas currency strategist Vassili
Serebriakov said investors are focused on the positive aspects
in the market -- falling euro zone peripheral bond yields and
firmer equities.
    "Certainly, the German industrial output data helped. But we
also have this positive risk environment in the euro zone and
that has supported the euro as well," Serebriakov said in New
York. 
    The euro rose as high as $1.3194, a one-week high.
Data showed German industrial output rose 1.2 percent during
March, against forecasts for a 0.1 percent fall. 
    The euro was last at $1.3178, up 0.8 percent
    Traders reported stop-loss euro buy orders at $1.3150, which
pushed the euro through resistance at $1.3156, the 100-day
moving average, on its way to the $1.3243 May peak. 
    One-month implied volatilities in euro/dollar 
remain near their lowest since January, suggesting investors are
reluctant to bet on sharp euro falls.   
    Some analysts, though, were wary about how much the euro
could rise, given that other recent data from Europe's largest
economy has been much gloomier.
    "We had two prints of good German data on a month-on-month
basis, but year-on-year, they're still a little negative. So we
still have to see more data," said Brian Kim, currency
strategist at RBS Securities in Stamford, Connecticut.
    "Overall we're still looking at poor long-term prospects for
the euro zone." 
    Against the yen, the euro was up 0.6 percent at 130.21 yen
, while the dollar was down 0.2 percent at 98.83 yen
.
    KIWI SLIDES
    The New Zealand dollar underperformed other major currencies
after the country's central bank said it had intervened to try
to restrain the strength of the currency. 
    The New Zealand dollar was down 0.8 percent at US$0.8387
, although analysts and traders were skeptical about how
much lasting impact intervention could have.
    "The RBNZ announcement is likely to make investors more
cautious on buying the New Zealand dollar in the near term, but
pretty soon investors will realize that if the intervention
impact is so unnoticeable that it takes a RBNZ comment to
disclose it, the RBNZ is either intervening in tiny amounts or
indeed is using a 'peashooter'," said Steven Englander, global
head of currency strategy at Citigroup in New York. 
    "I think we will see investors step in and buy some New
Zealand dollars." 
    
    The Norwegian crown, meanwhile, posted sharp gains on relief
that Norway's central bank kept interest rates unchanged at 1.5
percent. 
    The dollar fell 1.7 percent against the crown to 5.7451
kronas, while the euro dropped 1.0 percent to 7.5717
.
    "There was no indication that they considered a rate cut and
they see no reason to change their strategy from what they
indicated," said Steinar Juel, chief economist at Nordea Markets
in Copenhagen.
    "It was maybe a little bit more hawkish than could have been
expected, they could have pointed more to weaker inflation
numbers. Something more needs to happen for them to cut."
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