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

Mon Dec 9, 2013 12:11pm 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 strong trade numbers from China, which boosted investor
tolerance for riskier currencies.
    Europe's common currency remained resilient strong despite
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 within striking
distance of its yearly highs.
    China reported its trade numbers over the weekend. China's
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 the 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 $1.3730 and was last at
$1.3723, 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. 
    The euro also climbed against the yen, rising to 141.60
, reaching a high not seen since October 2008. It was
last trading at 141.64 yen, up 0.5 percent, ignoring a drop in
euro zone sentiment and a fall in German industrial output.
  
    Since Friday's U.S. labor market report, investors have been
selling the dollar and yen, according to CitiFX's flows report.
The bank's clients have been buying the euro, with Citi
expecting more demand from hedge funds.
    The euro's rise pushed the dollar index 0.1 percent
lower to 80.203, after earlier hitting a near six-week low of
80.169.
    The dollar tracked lower U.S. Treasury yields, which failed
to get traction from the 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 jobs number was not robust enough to lead markets to
price in an immediate withdrawal of monetary stimulus by the
Federal Reserve. As a result, U.S. Treasury yields fell,
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 program no later than
March, though only a handful of firms expect action as early as
next week. 
    Speeches by Fed policymakers Jeffrey Lacker, Richard Fisher
and James Bullard on Monday will be followed closely by traders
keen to hear any hints on when tapering will begin. 
    Of those three, only Bullard is a voting member of the
policy-setting Federal Open Market Committee this year. 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 safe-haven
Swiss franc. The franc was 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, and was last flat at 0.8916.
    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.
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