Euro Rises as German Confidence Increases; Aussie Dollar Weakens

The euro rose to the highest in more than four years versus the yen after a German report showed Europe’s economic recovery may be gaining momentum, easing speculation the central bank will cut interest rates further.

Australia’s dollar fell against all of its 16 most-traded peers amid speculation the nation’s central bank will take steps to curb the currency’s strength. The yen reached a four-month low versus the dollar after Bank of Japan Governor Haruhiko Kuroda said he will do his utmost to restrict an increase in long-term yields. Futures traders increased their bets that the yen will decline against the dollar to the most in six years.

The euro gained 0.7 percent to 137.28 yen at 5 p.m. New York time after touching 137.25, the highest level since October 2009. The shared currency rose 0.6 percent to $1.3558 and advanced for a second week. The dollar added 0.1 percent to 101.27 yen after reaching 101.35 yen, the strongest since July 8.

The Bloomberg U.S. Dollar Index, which tracks the currency against 10 major counterparts, fell 0.2 percent to 1,018.56 to pare its weekly gain to 0.2 percent.

(Source: Bloomberg)

Indonesia Pain Threshold Looms on Rate Increases: Southeast Asia

Indonesia’s most aggressive rate-tightening in eight years has barely dented a current-account deficit, prompting calls for more increases and other measures before the Federal Reserve cuts stimulus.

Bank Indonesia has raised borrowing costs by 1.75 percentage points to 7.5 percent since mid-June, the quickest since 2005. Following data last week showing the country recorded its second-highest current-account shortfall on record in the three months through September, JPMorgan Chase & Co. and Standard Chartered Plc now see a further 50 basis points of increases in the first half of next year.

Foreign funds pulled $3.8 billion from Indonesian stocks and local-currency bonds in June after the Fed said it could cut stimulus, and a lack of progress on improving the current account before the U.S. does eventually taper leaves the country vulnerable to another sudden outflow. The government said this week it will raise import taxes for consumer goods, showing policy makers are looking for other bullets to slay the deficit.

The rate rise on Nov. 12 came after a pause in October and was forecast by just one of 25 analysts surveyed by Bloomberg. A day later, the government reported a current-account deficit of $8.4 billion in the third quarter, compared with a record $9.9 billion in the previous three months.

(Source: Bloomberg)

Dollar Gains Versus Major Peers on Fed Taper in Coming Months

The dollar rose against most major peers as Federal Reserve officials said they might reduce their $85 billion in monthly bond purchases “in coming months” as the economy improves, minutes of their last meeting show.

The euro dropped from a four-year high versus the yen as the European Central Bank is considering a negative deposit rate if more economic stimulus is needed, according to two people with knowledge of the debate. The yen strengthened as a panel said Japan’s government-run pension fund needs restructuring.

The Bloomberg U.S. Dollar Index, which monitors the greenback against 10 major peers, increased for the first time in four days, adding 0.4 percent to 1,019.07 yen at 5 p.m. in New York.

The euro declined 0.8 percent to 134.43 yen after earlier touching 135.95, the strongest level since October 2009. The shared currency fell 0.7 percent to $1.3439. The dollar slid 0.1 percent to 100.03 yen.

(Source: Bloomberg)