Posted March 10, 2010
Euro gains on strong economic data out of China. Currency markets respond to Portugal's bond and better debt outlook in the eurozone.
The currency markets responded to better economic data on Wednesday. Further, the euro managed to fight back concerns over sovereign debt that had been plaguing it for the last several days. The euro gained over the yen and the dollar.
A variety of data was available on Wednesday to spur this growth. The Chinese released data that shows that global recovery is further gaining traction. The news provided included information on Chinese exports, which rose 45.7 percent in February over the previous year’s numbers. This was higher than the 21 percent increase in January. Imports into China also grew by 44.7 percent in February based on the previous year.
A sale of a Portuguese government bond also helped investors to overcome the concerns regarding the euro zone’s growing debt problems. The bond is a long dated government bond. The Portugal Treasury and Government Debt Agency reported the bond as being for EUR 990 million. The organization had planned to sell only a EUR 750 million bond. This helped to spur the currency markets on the positive news. At least some of the fears about the European debt crisis went on hold at this news.
Further, the Australian dollar rose significantly to levels it has not seen for the last seven weeks against the US dollar.
By late Wednesday, the euro had moved from $1.3601 (as of last Tuesday) to $1.365. The dollar moved from Y89.97 to Y90.56. The euro compares to this as Y122.36 to Y123.63. The dollar moved from CHF 1.0753to CHF 1.0704. The UK pound also moved from $1.4989 to $1.4966.
From late Tuesday, Deutsche Bank’s PowerShares US Dollar Index Bearish fund rose 0.04 percent. The PowerShares US Dollar Index Bullish moved down, however by 0.17 percent. Also important to note is that the ICE Dollar Index moved from 80.580 to 80.451. The ICE Dollar Index is a tool used to track the US dollar against trade-weighted currencies.
In further currency news, the dollar and the euro moved strongly against the Japanese yen. This was due to the economic data out of China that suggests that a global recovery is underway. The yen traditionally is a safer currency investment when economic times are more difficult. Against the Japanese yen, the euro moved more than 1 percent in positive territory. Further, the US dollar soared to the highest point it has been in, in the last two weeks, against the yen.
In addition, the Reserve Bank of New Zealand held its key interest rate at 2.5 percent, a record low for the country. The Bank also stated, in its announcement in New York late Wednesday, that it would begin to remove the monetary stimulus and that it would expect interest rates to begin to improve by the middle of this year. Investors believe that the Bank is unlikely to make any move until further economic data confirms that there is a robust recovery in the works.
Also important to note is that the Swiss National Bank intervened on Wednesday when the franc dropped, briefly, against the euro. The Bank offered no information, as is usually, though it is believed that the Bank has made such moves several times in the past.