Euro Strengthens on Bets ECB Will Keep Rates Unchanged

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Tradervox.com (Dublin) - The 17-nation currency advanced against the dollar and the yen as traders speculated a recent drop in the euro was too rapid. Some economists have also attributed the recent increase to bets of European Central Bank keeping its interest rates unchanged in their meeting tomorrow. The yen fell against its 16 major peers as a surge in Japanese equities led by Toyota Motor Corp. reduced demand for the currency as a haven. The dollar retreated from near a six-week high against the euro before data tomorrow forecast to show growth in the world’s largest economy slowed last quarter, weighing on expectations the Federal Reserve will move to reduce stimulus. New Zealand’s kiwi climbed to its highest since Oct. 24 as employers added more jobs than forecast.

According to Kara Ordway, a Sydney-based currency strategist at City Index Group Ltd, the ECB still has a much better balance sheet than the Fed, hence the euro might continue to strengthen against the dollar. He also added that the ECB is likely to hold its interest rates which will be positive for the euro. The euro climbed 0.4 percent to 133.19 yen as of 6:54 a.m. in London from yesterday, when it touched 132.37, the weakest since Oct. 10. It gained 0.2 percent to $1.3506, halting a 2.4 percent slide over the past seven days. The yen weakened 0.1 percent to 98.61 per dollar. The MSCI Asia Pacific Index of stocks gained 0.3 percent, while Japan’s Topix index of shares jumped 0.8 percent.

The ECB will probably leave its main refinancing rate unchanged at 0.5 percent when policy makers meet tomorrow, according to 67 of 70 economists surveyed. Bank of America Corp., Royal Bank of Scotland Group Plc and UBS AG have predicted in the past week that the ECB will cut. According to JPMorgan Chase & Co, the euro has held important support in the $1.3545 area which contains the lows from late September and early October.

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