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Euro Weakens on Draghi’s Stimulus Signal; Brazil’s Real Climbs

April 14 (Bloomberg) -- The euro dropped against most of 16 major counterparts after European Central Bank President Mario Draghi said further appreciation in the currency would trigger more monetary stimulus.

The dollar climbed to the highest in almost three weeks versus Europe’s shared currency after U.S. retail sales rose in March by the most since September 2012. Brazil’s real climbed versus all major peers on bets the nation’s interest rates, which it has been raising since 2013, will attract investors. Russia’s ruble fell for a third day versus a target basket of dollars and euros as unrest in Ukraine escalated.

“Draghi wants everyone to know they are willing to address those issues, but just talking is not really going to move markets,” Fabian Eliasson, head of U.S. currency sales in New York at Mizuho Financial Group Inc., said in a phone interview. “Retail sales came out fairly decent; it’s lifting the market a little.”

The euro weakened 0.5 percent to $1.3813 at 11:13 a.m. in New York, and lost as much as 0.6 percent, the biggest intraday decline since March 25. It appreciated to $1.3906 on April 11, the strongest level since March 19. The 18-nation currency dropped 0.3 percent to 140.66 yen. The dollar gained 0.2 percent to 101.82 yen.

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, advanced 0.2 percent to 1,008.40 following a 1 percent loss last week.

Retail Sales

The greenback extended gains versus the euro after the Commerce Department reported U.S. retail sales increased 1.1 percent. The jump exceeded the median projection of 0.9 percent in a Bloomberg survey and followed a 0.7 percent gain in February that was bigger than previously reported. Sales excluding receipts at gas stations were the strongest in four years.

U.S. stocks gained, with the Standard & Poor’s 500 Index rising 0.8 percent in its first advance in three days. The Stoxx Europe 600 Index erased a drop of as much as 1 percent.

The ruble declined 0.5 percent to 42.0767 versus the central bank’s target basket of dollars and euros. European Union foreign ministers said the bloc should be prepared to impose a third round of sanctions because the government in Moscow is stoking deadly separatist unrest in Ukraine.

“Insecurity in Ukraine is written and choreographed by Russia,” U.S. Ambassador to the UN Samantha Power told the Security Council yesterday. “The U.S. stands with Ukraine and the fundamental principle that the future of Ukraine must be decided by the Ukrainian people.”

Real Climbs

Brazil’s real gained 0.4 percent to 2.2102 against the greenback, leading rally among the dollar’s 31 most-traded counterparts.

The nation has raised borrowing costs nine times since April 2013, the most among 49 central banks tracked by Bloomberg. It posted net foreign currency inflows of $2.3 billion last month, the biggest since November.

China’s yuan forwards fell to an eight-month low on concern the world’s second-biggest economy is faltering. Twelve-month non-deliverable forwards declined 0.15 percent to 6.25 per dollar, the weakest level since Aug. 23. The contracts traded at a 0.5 percent discount to the onshore spot rate in Shanghai, which dropped 0.13 percent to close at 6.2191.

China should put in place a “moderate, controllable and targeted loose” monetary policy to meet demand for funds by the real economy, Zhang Monan, researcher at the China Center for International Economic Exchanges, wrote in a commentary in the China Daily today.

GDP Outlook

Data due this week may show the nation’s gross domestic product grew 7.3 percent last quarter from a year earlier, the least since 2009, according to a Bloomberg survey. Exports fell 6.6 percent in March, a report last week showed, compared with economists’ estimate for a 4.8 percent advance.

“Exports came in well below market consensus, and this is still an important reason” for the yuan’s decline, said Nathan Chow, an economist at DBS Group Holdings Ltd. in Hong Kong. “Room for further big depreciation is limited because, after the release of first-quarter GDP, second-quarter data will show the economy is stabilizing.”

The euro has rallied 6.5 percent in the past 12 months, the best performer after the pound and franc of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 0.5 percent, while the yen weakened 3.3 percent.

‘Price Stability’

“I’ve always said that the exchange rate is not a policy target, but it’s important for price stability and growth,” Draghi said on April 12. “And now, what has happened over the last few months, it’s become more and more important for price stability.”

Draghi’s statement was echoed by other ECB officials in weekend meetings of the International Monetary Fund and World Bank in Washington.

Hedge funds and other large speculators were the least bullish on the shared currency in six weeks. The difference in the number of wagers on an advance compared with those on a decline, known as net longs, was 23,300 on April 8, the lowest since Feb. 25, figures from the Washington-based Commodity Futures Trading Commission showed on April 11.

“Draghi’s comment may be arresting the euro appreciation for now but is unlikely to weaken it unless he takes action,” said Athanasios Vamvakidis, head of Group-of-10 currency strategy at Bank of America Merrill Lynch in London.

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