Euro Rises on Global Recovery Signs, Readiness to Rescue Greece

Tokyo - The euro rose against the yen and the dollar for a second day as expectations increased Greece will get assistance, boosting demand for higher-yielding assets. Europe’s currency strengthened against 11 of its 16 major counterparts after French President Nicolas Sarkozy yesterday said the euro region is ready to rescue Greece and before Greek Prime Minister George Papandreou meets U.S. President Barack Obama in Washington tomorrow. The yen dropped as Asian shares extended a global stock rally, curbing demand for Japan’s currency as a refuge. “The U.S. is going to reinforce completely what France and Germany are telling” Papandreou, said Adrian Foster, head of financial-markets research for Asia at Rabobank Groep NV in Hong Kong. “That is, you need to lead the solution and other people will fall in line with assistance.” The euro rose to 123.90 yen, the strongest since Feb. 23, as of 7:18 a.m. in London from 123.00 yen in New York on March 5. Europe’s single currency advanced to $1.3693 from $1.3626. Futures traders decreased bets the euro will decline against the dollar, figures from the Washington-based Commodity Futures Trading Commission showed. The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain -- so-called net shorts -- was 66,770 on March 2, compared with net shorts of 71,623 a week earlier. ‘Risk Sentiment’ “Risk-taking sentiment is getting better, given some optimism over the global rebound,” said Akane Vallery Uchida, a currency strategist at Royal Bank of Scotland Group Plc in Tokyo. “It’s an environment where the yen is likely to be sold against growth-sensitive currencies.” The 16-nation euro also strengthened before a report forecast to show German industrial output expanded 1 percent in January after shrinking 2.6 percent the previous month, according to a Bloomberg News survey. The Economy Ministry releases the data today. Malaysia’s ringgit led Asian currencies higher as the Nikkei 225 Stock Average climbed to its highest close since Jan. 22 and as the MSCI Asia Pacific Index of regional shares gained 1.9 percent. The Malaysian currency advanced to its strongest level in almost seven weeks after a government report on March 5 showed that exports rose 37 percent from a year earlier in January, the most in 11 years. A U.S. report the same day showed employers cut fewer jobs in February than estimated. Data Surprises “The market is adjusting its targets given the surprise elements in recent local and U.S. data,” said Akira Banno, a treasury adviser at Bank of Tokyo-Mitsubishi UFJ Bhd. in Kuala Lumpur. “Foreign demand is gradually improving, and the ringgit may strengthen further with a good stock market performance.” The ringgit rose 0.6 percent to 3.3428 per dollar, after earlier reaching 3.3393, the highest level since Jan. 20. Benchmark interest rates of 0.1 percent in Japan and as low as zero in the U.S. compare with 2.25 percent in Malaysia and 4 percent in Australia, attracting investors to the Asia- Pacific nations’ higher-yielding assets. The euro advanced to a two-week high against the yen after Sarkozy made some of the strongest comments by a European Union leader to signal the bloc would bail out Greece. “I want to be very clear: if it were necessary, the states of the euro zone would fulfill their commitments,” Sarkozy said yesterday in Paris after a meeting with Papandreou. “There can be no doubt in this regard.” Papandreou’s government last week passed a further round of austerity measures and sold 5 billion euros ($6.8 billion) in government debt. Avalanche of Support “The important thing is that almost everyone now agree that the Greek government has done as much as they can at this stage,” Erik F. Nielsen, chief European economist in London at Goldman Sachs Group Inc., wrote in an e-mailed note yesterday. “So, the measures were appropriately met with an avalanche of supportive words from the rest of Europe.” German Chancellor Angela Merkel, who runs Europe’s largest economy, said at a joint press conference with Papandreou on March 5 that Greece doesn’t need financial aid, as she turned her focus to restricting the use of derivatives to halt “speculators” from exploiting countries’ budget deficits. Losses in the yen were tempered on speculation Japanese companies will bring home overseas earnings before the fiscal year ends this month. “One source of yen buying is corporate repatriation,” Geoffrey Yu, a currency strategist in London at UBS AG, wrote in a research note dated today. “Companies with overseas earnings may be looking to repatriate the majority of their 2009 earnings for various purposes.” Large Japanese manufacturers expect the yen to average 91.16 per dollar in the six months to March 2010, according to the Bank of Japan’s quarterly Tankan survey.