May 8, 2013 / 5:36 PM / 4 years ago

FOREX-Euro rallies as upbeat German data curbs ECB rate cut talk

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

    By Julie Haviv
    NEW YORK, May 8 (Reuters) - The euro leapt to a one-week
high against the dollar and a more than two-week peak against
the yen on Wednesday as upbeat German data eased worries about
the region's largest economy and curbed expectations of a
near-term interest rate cut in the euro zone.
    The euro gained for second straight day against the
greenback, paring its year-to-date loss to a mere 0.2 percent,
after data showed German industrial output rose 1.2 percent
during March, against forecasts for a 0.1 percent fall.
 
    The data supported an improvement in euro sentiment that was
ignited a day earlier by another upbeat report on German
industrial orders. Falling borrowing costs in peripheral euro
zone countries have also favored Europe's common currency. 
    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. 
    While the robust German data buoyed the euro, strong data
out of China, the world's second-largest economy, raised risk
appetite globally. China's daily crude imports in April rose 3.7
percent from a year ago.  
    Nevertheless, further easing from the European Central Bank
was still a possibility, 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.
 
    The euro last traded at $1.3170, up 0.7 percent,
after earlier hitting a peak of $1.3194, a one-week high. 
    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 of 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 last traded at 130.24 
yen, up 0.6 percent, down from a session peak of 130.42 yen, its
highest since April 22. 
    The dollar was at 98.86 yen, down 0.1 percent on the
day, according to Reuters data.
    
    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. For FX
column on RBNZ's impact on the kiwi, see 
    The New Zealand dollar was down 0.7 percent at US$0.8396
, 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 5.7432
kronas, while the euro dropped 1.0 percent to 7.5656
.
    "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,"  he
said.

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