Daily Forex Round-Up: Euro (EUR) Supported by Positive Domestic Data

on Dec 19, 2012

December 19 was a good day for the euro, with the single currency advancing to a 16-month high against the yen, and to an eight and a half month peak versus the greenback (USD). And while the euro was supported by positive domestic news, weak economic data weighed on the yen, adding to the downward pressure on Japan’s currency.

**The Single Currency Strengthens**
On 19 December 2012, Reuters reported that the euro surged to a 16-month high against the yen. The single currency advanced 0.9 percent to trade at ¥112.41 after hitting ¥112.49 earlier, a level unseen since August 2011. The single currency gained ground against the US dollar as well, rising to $1.3308, its highest level since early April.

The euro was boosted by Germany’s Ifo survey which indicated that business sentiment rose for a second consecutive month in December. In addition, on Tuesday, the ratings agency Standard & Poor’s raised Greece’s credit rating after the country completed its bond buyback programme.
“The euro is doing well across the board and there are fundamental drivers here,” noted Vassili Serebriakov, currency strategist at BNP Paribas (EPA:BNP), as quoted by Reuters. “We had good data from Germany, plus we’re getting the sense there is a smooth resolution of the Greek problem.”

The euro also benefited from hopes that US policy makers will manage to reach an agreement to avert the impending tax hikes. “The euro has been trading like a risk asset,” said Peter Kinsella, a currency strategist at Commerzbank (FRA:CBK, ETR:CBK, PINK:CRZBY), as quoted by Bloomberg. “There’s a generally benign environment where risk is performing reasonably well. The yen’s traditional role as a safe haven is also paying the price for this.”

**Yen Declines on BOJ Expectations, Weak Data**
The safe haven image, however, was not the only reason for the yen’s downward movement on Wednesday. Bloomberg reports that a Japanese government report showed that the trade deficit widened in November, with exports sliding 4.1 percent relative to a year earlier. In addition, the yen was also under pressure by the ongoing policy meeting of the BOJ.

!m[](/uploads/story/1069/thumbs/pic1_inline.png)“Yen selling is likely to remain intact,” noted Koji Iwata, vice president of foreign exchange trading at Mizuho Corporate Bank Ltd, as quoted by Bloomberg. “The BOJ will probably disappoint the market if it doesn’t boost asset purchases.” Reuters quotes some analysts as warning that the BOJ measures might fall short of expectations which could in turn prompt some to buy back the yen. Bloomberg reports that Japan’s currency depreciated 0.4 percent to 84.57 per US dollar.
**Pound (GBP) Boosted by BoE Minutes**
The pound rose for a fourth day against the greenback, with minutes from the December 5-6 policy meeting showing that policy makers voted 8-1 to pause the BoE’s asset-buying programme. Bloomberg reports that the pound was up 0.2 percent against the greenback to $1.6277 at 2:36 p.m. GMT, after rising to $1.6307, the most since September 21.
**Norway’s Krone (NOK) Rises**
While on December 18 Sweden’s krona (SEK) advanced, December 19 saw another Scandinavian currency gain ground. Bloomberg reports that Norway’s krone rose to its highest level against the dollar since March, with Norges Bank announcing that it would keep interest rates at 1.5 percent.
“Developments in the Norwegian economy give reason to believe that inflation will gradually pick up. This suggests that the key policy rate can be raised further out,” said Norges Bank Deputy Governor Jan F. Qvigstad in a press release.
Bloomberg notes that the krone gained one percent to 5.5641 per dollar after appreciating to the strongest since February 29.


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