August 30th, 2012

Dollar Index Futures – The euro rose approached an eight- week high against the dollar as Italian borrowing costs dropped at an auction on optimism the European Central Bank may soon start buying euro nations’ bonds.

Europe’s shared currency advanced against most of its 16 major peers before Spanish and French leaders meet in Madrid amid speculation of a second bailout. The yen appreciated against the dollar after U.S. economic reports showed jobless claims rose and consumer spending climbed less than forecast. Norway’s krone rose against all its major peers even after a policy maker signaled the central bank won’t accept persistent currency strength.

“The strength of the Italian auction was beneficial for the euro,” Greg Anderson, the North American head of Group of 10 currency strategy at Citigroup Inc. in New York, said in a telephone interview. “There was lots of participation at a lower rate.”

The euro climbed 0.2 percent to $1.2553 at 8:38 a.m. New York time, after reaching $1.2590 on Aug. 23, the most since July 4. Europe’s shared currency was little changed at 98.62 yen. It touched 99.18 yen on Aug. 21, the strongest since July 5. The dollar fell 0.2 percent to 78.53 yen after gaining 0.3 percent yesterday.

The euro advanced 1.3 percent in the past month, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. Norway’s krone rose 3.2 percent to lead the gainers. The dollar fell 1.3 percent and the yen slid 1.9 percent. The Australian dollar’s 3 percent loss paces decliners.

‘Persistently Strong’

Norway’s krone gained against the euro after Norges Bank Deputy Governor Jan F. Qvigstad warned speculators against testing the central bank’s resolve following the currency’s appreciation to a nine-year high this month.

“If the krone is persistently strong that is, in isolation, an argument for a lower interest rate,” he said in an interview in Oslo yesterday. There’s “large” volatility in the krone, which can make it difficult to “make a profit” from the strength of the currency, he said.

Norway’s krone rose 0.1 percent to 7.2848 per euro after reaching 7.2502 per euro on Aug. 10, the strongest level since Jan. 2003. It gained 0.3 percent to 5.8019 per dollar.

Hollande, Rajoy

French President Francois Hollande meets Spanish Prime Minister Mariano Rajoy after the Spanish region of Murcia became the third to say it will need emergency loans and Valencia signaled it needs funds, a day after Catalonia said it needed 5 billion euros ($6.3 billion). The leaders will hold a joint press conference at about 2:30 p.m. Madrid time.

“Spain asking for more aid would be euro positive because it would allow the ECB to buy Spanish government bonds and support the market,” said Kasper Kirkegaard, a senior currency strategist at Danske Bank A/S (DANSKE) in Copenhagen. The meeting between Hollande and Rajoy “is the focus for the market,” he said.

The euro will probably advance to $1.27 over the next three months as policy makers’ actions to stem the turmoil boost demand for the region’s assets, Kirkegaard said.

Italy sold 7.29 billion euros of five- and 10-year securities, compared with a 7.5 billion-euro maximum target. The average yield on the 10-year bond was 5.82 percent, down from 5.96 percent at a previous auction on July 30.

The greenback weakened against the euro and the yen today as investors weighed whether Federal Reserve Chairman Ben S. Bernanke will signal a new round of stimulus for the U.S. economy when he speaks in Jackson Hole, Wyoming, tomorrow.

Economic Reports

Jobless claims were little changed at 374,000 in the week ended Aug. 25, matching the upwardly revised figure from the prior week, the Labor Department reported today in Washington. The median forecast of 50 economists surveyed by Bloomberg News called for 370,000.

Purchases increased 0.4 percent after being little changed in June, Commerce Department figures showed today in Washington. The median estimate of 76 economists surveyed by Bloomberg called for a 0.5 percent gain in so-called nominal sales. Incomes climbed 0.3 percent for a third month.

Demand for the euro increased after Draghi used the pages of German weekly Die Zeit yesterday to plead for a more expansive central bank role.

‘New Architecture’

“A new architecture for the euro area is desirable to create sustained prosperity for all euro-area countries, and especially for Germany,” Draghi wrote. “Yet this new architecture does not require a political union first.”

Draghi will give a media briefing on Sept. 6 after a meeting of policy makers.

“Expectations for the ECB are stronger than those for the Fed,” said Koji Iwata, vice president of foreign-exchange trading in New York at Mizuho Corporate Bank Ltd., a unit of Japan’s third-biggest financial group by market value. “We can say that’s why the euro remains stronger than other currencies.”

While Europe’s shared currency has risen above the so- called cloud between the first and second leading span lines on its daily ichimoku chart against the dollar, “it would take a close above the 200-day average to clearly signal that the trend is changing,” Barclays Plc (BARC) technical analysts led by Jordan Kotick wrote in a note to clients yesterday.

The euro’s 200-day moving average is $1.2863, according to data compiled by Bloomberg. Ichimoku charts are used to predict a currency’s direction by analyzing the midpoints of historical highs and lows.

- Joseph Ciolli in New York and Emma Charlton in London at Bloomberg.