[B]Market Review - 11/02/2013 [I]19:19GMT[/I]
Euro rises as ECB’s Weidmann denies talk of intervention[/B]
The single currency advanced on Monday as the European Central Bank council member Jens Weidmann said the euro currency was not overvalued and dismissed market talk of intervening the market.
Although euro dropped briefly below Friday’s low at 1.3353 to 1.3330 at New Zealand open, the pair edged higher in thin Asia session as only Australia and New Zealand were opened and price then rose to 1.3391 before retreating to 1.3357. Later, despite euro’s rise to 1.3412 ahead of New York open, cross selling of euro versus yen pressured the pair to 1.3362 but the comments from ECB’s Weidmann pushed the pair to a high of 1.3428 at New York midday.
European Central Bank policymaker Jens Weidmann said ‘discussion about over valuation of euro is a diversion from the real challenge; central bank cannot solve euro zone crisis, only governments can; latest indicators do not signal a serious overvaluation of the euro; past experience shows politically-led devaluations generally do not lead to gains in competitiveness; fx rates are considered in monetary policy decisions insofar as they influence price developments; fx policy aiming to weaken the euro would lead to higher inflation; ECB should not do more to curtail crisis because has already done a lot; ECB measures have stretched the central bank’s mandate.’
Versus the Japanese yen, despite dollar’s sideways move in holiday-thinned Asian trading y’day, yen-bearish comments by Asian Development Bank’s President and potential BoJ Governor candidate Kuroda prompted a wave of renewed broad-based yen selling, price easily climbed abv 94.04/08 res and later rose to a fresh 33-month peak of 94.46 near New York close after comments by U.S. Treasury Department’s top international official.
Lael Brainard, the Treasury’s undersecretary for international affairs, said at an afternoon news conference in Washington she supports the effort in Japan to end deflation and “reinvigorate growth. It will be important that structural reforms accompany macroeconomic policies to achieve these goals.”
Haruhiko Kuroda spoke in an interview and said ‘BoJ has many policy tools to achieve 2% inflation target; 2% inflation is appropriate for Japan; monetary policy alone can achieve inflation target; yen drop is ‘natural adjustment’ fm excessive value; addition BoJ easing can be justified for 2013.’
Although the British pound edged higher from Australian low at 1.5785, the pair nose-dived from Asian high at 1.5810 to 1.5678 on active cross selling of sterling versus euro. The strong rise in eur/gbp pressured the pair further lower to 1.5652 in New York morning before staging a recovery.
In other news, Eurogroup’s Dijsselbloem said ‘ministers agreed to explore limits on ESM direct recapitalisation within overall ESM financial capacity; ministers to discuss in March how to best support Ireland’s n Portugal’s return to markets; ministers discussed euro fx, concluded it was a top for G20 ministers this week.’ French Finance Minister Pierre Moscovici said ‘it is up to markets to set exchange rates, but rates must reflect economic fundamentals; important that Europe can act together at G20 in favour of exchange rate stability; all instruments can be used to stabilise exchange rates although must be coordinated.’ Fed’s Yellen said ‘gulf between maximum employment and current difficulties faced by workers help explain urgency of Fed’s efforts to strengthen recovery; Fed has taken and is continuing to take forceful action to increase pace of economic growth and job creation; expects discretionary fiscal policy to remain an economic headwind from some time; long-term unemployment may itself become a headwind restaining the economy; encouraged by recent improvement in residential sector, but housing’s contribution to growth remains well-below past recoveries.’
[B]Data to be released on Tuesday: [/B]
U.K. RICS house prices, Australia NAB business conditions, NAB business confidence, Japan Consumer confidence, Machinery orders, France current account, Swiss CPI, U.K. CPI, RPI, PPI input, PPI output, PPI core, ONS House price, U.S. Redbook retail sales, Fed budget. (China is closed due to market holiday.)