Euro Trades at Almost 7-Week High Before ECB Meeting
Frankfurt (May 7) The euro traded at almost a seven-week high before the European Central Bank is forecast to refrain from adding additional monetary stimulus at a meeting tomorrow.
ECB policy makers will retain a record low 0.25 percent rate target, according to the median estimate of economists in a Bloomberg survey. The New Zealand dollar slid versus all 16 of its major peers after Reserve Bank Governor Graeme Wheeler said the central bank may consider selling the currency if it fails to respond to worsening fundamentals. A U.S. dollar gauge was little changed before Federal Reserve Chair Janet Yellen testifies to U.S. lawmakers today and tomorrow.
“People are waiting on the ECB tomorrow,” Brad Bechtel, managing director at Faros Trading LLC in Stamford, Connecticut, said in a phone interview. “We’re probably going to test $1.40 to see what’s there. There’s scope to go a lot higher.”
The euro was little changed at $1.3924 at 8:06 a.m. in New York, after climbing to $1.3951 yesterday, the highest since March 13. The common currency was little changed at 141.67 yen. The dollar was little changed at 101.74 yen, after touching three-week low.
The kiwi dropped from close to its highest in almost three years against the greenback reached yesterday as whole-milk powder prices declined for a sixth straight auction.
The index has declined 1.3 percent since March 31 and 10-year Treasury yields dropped 15 basis points, or 0.15 percentage point. The yield was 2.58 percent today compared with the median year-end forecast for an increase to 3.32 percent.
Yellen’s testimony may “err on the dovish side,” Michael Turner, a debt and currency strategist at Royal Bank of Canada in Sydney, wrote in a note to clients.
South Korea’s won strengthened 0.2 percent to 1,022.75 today, after touching 1,022.60, the strongest since August 2008. Authorities will take action to stabilize the market if volatility is too high, Bank of Korea Director General Ryoo Sang Dai said by phone.
ECB President Mario Draghi stepped up his war of words against the euro’s gains in recent months, culminating in an April 24 pledge to start asset purchases if a stronger currency keeps inflation depressed.
“The main problem for the ECB is if they don’t do anything,” Beat Siegenthaler, a currency strategist at UBS AG in Zurich, said yesterday by phone. “Then I would think we’d break the highs of the year, which will mean more pressure for them later on. If we do go above $1.40 it would create a lot of headlines that they could do without.”
The shared currency has gained 6 percent in the past 12 months, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The yen dropped 4.1 percent and the dollar fell 1.1 percent.