• News
  • Finance

Dollar Gains Before Data as Sinking German Confidence Hurts Euro

Aug. 12 (Bloomberg) -- The dollar rose against the euro and yen before reports that analysts forecast will add to evidence that the U.S. economic recovery is gathering pace.

The euro fell toward the lowest since November after a report today showed investor confidence in Germany slumped to the lowest level since 2012. A gauge of the dollar was 0.2 percent from the highest since February before a report tomorrow economists forecast will show U.S. retail sales grew for a sixth month. The yen weakened for a second day as easing tensions in Ukraine reduced demand for the currency as a haven. New Zealand’s currency fell versus 14 of its 16 major peers after the housing market slowed.

“Geopolitics appears to be taking a back seat for now, and focus is back on data,” said Valentin Marinov, head of European Group-of-10 foreign-exchange strategy at Citigroup Inc. in London. “U.S. growth outlook has improved while the confidence data today suggests the opposite for the euro area. That highlighted the diverging paths of the Fed’s and the ECB’s rates policy.”

The dollar appreciated 0.3 percent to $1.3344 per euro as of 7:13 a.m. New York time, after reaching $1.3333 on Aug. 6, the strongest since Nov. 8. The U.S. currency gained 0.1 percent to 102.33 yen. The euro weakened 0.2 percent to 136.52 yen.

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 developed-market peers, added 0.2 percent to 1,022.85. The gauge touched 1,024.67 on Aug. 6, matching the highest since Feb. 11.

Dollar Strength

The dollar strengthened before data tomorrow that economists predict will show U.S. retail sales increased 0.2 percent in July after a 0.2 percent advance the prior month.

U.S. economic growth rebounded last quarter from the biggest contraction in five years, the Commerce Department reported last month. Job openings in the U.S. were close to a seven-year high in June, and optimism among small businesses rose in July, based on Bloomberg News surveys of economists before the reports today.

There’s about an 79 percent chance the Fed will raise its benchmark, the target for overnight loans between banks, to at least 0.5 percent by October next year, futures trading shows.

The yen declined as concern over geopolitical tensions eased. Russian warplanes ended drills in the region near Ukraine, Interfax reported, citing comments from the Defense Ministry last week. RIA Novosti said Russia is ready to mediate between Ukraine and separatist rebels, quoting Russian Security Council head Nikolai Patrushev.

Confidence Drops

The euro fell to about 0.1 percent from a nine-month low versus the dollar after a report by the ZEW Center for European Economic Research today on its index of investor and analyst expectations in Germany, which aims to predict economic developments six months in advance. The gauge fell to 8.6 in August from 27.1 in July, while economists had forecast a decrease to 17, according to estimates in a Bloomberg News survey.

The euro-area economy expanded 0.1 percent in the second quarter from the previous three months, down from 0.2 percent in the January to March period, a separate survey showed before the data are released on Aug. 14.

“The poor ZEW data is bad news for the euro,” said Peter Rosenstreich, chief foreign-exchange analyst at Swissquote Bank SA in Gland, Switzerland. “We know about the economic weakness in peripheral countries like Italy, but there’s always hope that Germany will be a growth engine that supports the region. Now the growth engine itself seems to be sputtering as well. The ECB needs a growth story to boost inflation.”

New Zealand’s currency fell for a fourth day after a report from the nation’s Real Estate Institute showed annual home-price gains last month were the least since September 2012. The kiwi weakened 0.4 percent to 84.27 U.S. cents.

“The overall tone of the report felt heavy,” Annette Beacher, the Singapore-based head of Asia-Pacific research at TD Securities Inc., wrote in an e-mailed note to clients today. “The NZD fell on the weak data, and softer activity data of late is assisting our NZD underperformance theme.”

User Response
0 UserComments