The euro weakened after the European Central Bank awarded a second round of three-year loans to banks, increasing the supply of the currency and boosting higher-yielding assets.
The 17-nation currency declined versus all but one of its 16 major counterparts as the ECB said it will lend financial institutions 529.5 billion euros ($713 billion) for three years, surpassing the 470 billion euros forecast by economists. The Australian dollar climbed to the strongest since August after the ECB announcement on speculation part of the cash will be spent on higher-yielding assets.
“There is a chance that the euro will weaken, at least in the near term, on the ground that growing your balance sheets this much and this quickly can’t be good for the euro,” said Kit Juckes, head of currency research at Societe Generale SA in London. “The long-term loan is more positive for high-yielding assets than euro assets.”
The euro dropped 1 percent against the New Zealand dollar, and declined 0.7 percent against Australia’s currency. The single currency fell 0.1 percent to $1.3451 at 7:26 a.m. in New York, trimming this month’s gain to 2.7 percent. It weakened 0.1 percent to 108.15 yen.
The Frankfurt-based ECB said it will lend the funds to 800 financial institutions. In the ECB’s first three-year refinancing operation in December, 523 banks borrowed 489 billion euros.
Dollar Weakens
The dollar declined against higher-yielding currencies before Federal Reserve Chairman Ben S. Bernanke testifies in Congress today after saying last month that policy makers are keeping open the option to boost bond purchases.
Bernanke said after the Fed’s January meeting that the central bank is considering buying more bonds after policy makers extended their pledge to keep the benchmark interest rate at “exceptionally low levels” at least through late 2014. The Fed has engaged in two rounds of asset purchases, totaling $2.3 trillion in so-called quantitative easing.
“What Bernanke says today is likely to confirm the market view that the Fed will stick to its low-interest rate policy,” said Peter Rosenstreich, chief currency strategist at Swissquote Bank SA in Geneva. “That will continue to make the dollar a funding currency of choice”
Australian Dollar
Australia’s dollar rose for a third day against the greenback after government data showed retail sales rose in January, adding to speculation the Reserve Bank will keep the highest interest rates among major developed economies.
Australian retail sales climbed 0.3 percent last month from December, when they fell 0.1 percent, the Bureau of Statistics said in Sydney today. The result matched the median forecast in a Bloomberg News survey of economists and is the biggest gain since September.
The retail sales figure “bucks the recent trend towards weakness, which I think is a positive,” said Todd Elmer, head of Group-of-10 foreign-exchange strategy for Asia excluding Japan at Citigroup Inc. in Singapore. “That has the potential to support interest-rate expectations and that only adds to the attractiveness of the Aussie in a risk-on world.”
The Australian dollar rose 0.6 percent to $1.0834 after climbing to $1.0856, the strongest level since Aug. 2.
The 17-nation currency declined versus all but one of its 16 major counterparts as the ECB said it will lend financial institutions 529.5 billion euros ($713 billion) for three years, surpassing the 470 billion euros forecast by economists. The Australian dollar climbed to the strongest since August after the ECB announcement on speculation part of the cash will be spent on higher-yielding assets.
“There is a chance that the euro will weaken, at least in the near term, on the ground that growing your balance sheets this much and this quickly can’t be good for the euro,” said Kit Juckes, head of currency research at Societe Generale SA in London. “The long-term loan is more positive for high-yielding assets than euro assets.”
The euro dropped 1 percent against the New Zealand dollar, and declined 0.7 percent against Australia’s currency. The single currency fell 0.1 percent to $1.3451 at 7:26 a.m. in New York, trimming this month’s gain to 2.7 percent. It weakened 0.1 percent to 108.15 yen.
The Frankfurt-based ECB said it will lend the funds to 800 financial institutions. In the ECB’s first three-year refinancing operation in December, 523 banks borrowed 489 billion euros.
Dollar Weakens
The dollar declined against higher-yielding currencies before Federal Reserve Chairman Ben S. Bernanke testifies in Congress today after saying last month that policy makers are keeping open the option to boost bond purchases.
Bernanke said after the Fed’s January meeting that the central bank is considering buying more bonds after policy makers extended their pledge to keep the benchmark interest rate at “exceptionally low levels” at least through late 2014. The Fed has engaged in two rounds of asset purchases, totaling $2.3 trillion in so-called quantitative easing.
“What Bernanke says today is likely to confirm the market view that the Fed will stick to its low-interest rate policy,” said Peter Rosenstreich, chief currency strategist at Swissquote Bank SA in Geneva. “That will continue to make the dollar a funding currency of choice”
Australian Dollar
Australia’s dollar rose for a third day against the greenback after government data showed retail sales rose in January, adding to speculation the Reserve Bank will keep the highest interest rates among major developed economies.
Australian retail sales climbed 0.3 percent last month from December, when they fell 0.1 percent, the Bureau of Statistics said in Sydney today. The result matched the median forecast in a Bloomberg News survey of economists and is the biggest gain since September.
The retail sales figure “bucks the recent trend towards weakness, which I think is a positive,” said Todd Elmer, head of Group-of-10 foreign-exchange strategy for Asia excluding Japan at Citigroup Inc. in Singapore. “That has the potential to support interest-rate expectations and that only adds to the attractiveness of the Aussie in a risk-on world.”
The Australian dollar rose 0.6 percent to $1.0834 after climbing to $1.0856, the strongest level since Aug. 2.
