FOREX-Euro gains on better money market conditions, China data

Mon Dec 9, 2013 9:18am EST

Related Topics

* Euro hits six-week highs vs dollar, five-year peak on yen
    * Euro supported by higher money market rates in euro zone
    * Dollar falls to 1-1/2-month low vs Swiss franc

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Dec 9 (Reuters) - The euro rose to a six-week high
against the dollar and a five-year peak versus the yen on
Monday, helped by tighter money market conditions in the euro
zone and China's strong trade numbers which have boosted
investor tolerance for riskier currencies.
    Europe's common currency stayed strong despite last Friday's
better-than-expected U.S. non-farm payrolls report, tepid
economic conditions in the euro zone, and constant reiteration
by European monetary officials that interest rates would remain
low for some time. The euro is now within striking distance of
its yearly highs.
    Further helping risk sentiment were strong trade numbers
from China. Its exports came in well above forecast in November,
rising 12.7 percent from a year earlier, while imports rose 5.3
percent. 
    "The strong labor data out of the U.S. and the robust trade
balance numbers from China suggest that global growth may be
better than consensus view," said Boris Schlossberg, managing
director of FX strategy at BK Asset Management in New York.
    "Under that scenario, both the U.S. and China could act as
locomotives for global GDP expansion and help lift the euro zone
out of its funk." 
    The euro rose as high as $1.3728 and was last at
$1.3722, firmer on the day as short-term interest rates in the
euro zone money market edged up with the chances of more easing
by the European Central Bank looking slim for now. 
    Against the yen, the euro climbed to 141.56,
reaching highs not seen since October 2008. It was last trading
at 141.38 yen, up 0.3 percent on the day, ignoring a drop in
euro zone sentiment and a fall in German industrial output.
  
    The euro's rise nudged the dollar index down 0.1
percent to 80.203, having hit a near six-week low of 80.169
earlier in the day.
    The dollar tracked lower U.S. Treasury yields, which failed
to get traction from a strong U.S. payrolls number. U.S.
employers hired more workers than expected in November, driving
the jobless rate to a five-year low of 7.0 percent.
    But the better-than-expected jobs number was not robust
enough to lead markets to price in an immediate withdrawal of
monetary stimulus by the Federal Reserve. That pushed U.S.
Treasury yields lower and dragging the dollar down.
    Still, Camilla Sutton, chief currency strategist at
ScotiaBank in Toronto, said the overall U.S. economic
environment suggests that tapering is likely to happen in
January.
    "The Fed will work hard to push out expectations for higher
rates as it tapers and there is a risk of a decision to lower
the unemployment threshold," said Sutton. "In this environment
we would expect the U.S. dollar to be broadly stronger."
    A Reuters poll showed Wall Street firms expect the Fed to
start reducing its massive bond-buying programme no later than
March, though with only a handful of them expecting action as
early as next week. 
    Fed policymakers like Jeffrey Lacker, Richard Fisher and
James Bullard will speak later, with traders keen to hear any
hints on when tapering will begin. 
    The only speaker who is a voting member of the Federal Open
Market Committee this year is Bullard, however. He recently said
a strong payrolls number would raise the chance of tapering in
December.
    The dollar fell to a 1-1/2 month low against the
low-yielding safe-haven Swiss franc, with the latter also
buoyed by growing signs that deflation in Switzerland was
abating and the economy was growing. The dollar fell to 0.8905
franc, its lowest since Oct. 25.
    Against the yen, the dollar held firm at 103.08 yen,
up 0.2 percent, following Friday's 1.1 percent rally, not far
from the six-month peak of 103.38 hit on Tuesday. The yen
continued to underperform on the Bank of Japan's ultra-loose
monetary policy and the pick-up in risk appetite. 
    Data on Monday showed Japan's current account balance
unexpectedly fell into the red in October, underpinning the
dollar against the yen.
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