Jan. 13 (Bloomberg) -- The euro headed for its first weekly gain versus the dollar in six weeks as Italian bonds advanced and European Central Bank President Mario Draghi said policy makers have averted a credit shortage.
The 17-nation currency strengthened earlier as Italy prepared to auction notes today. The Dollar Index was poised for its first weekly decline in three weeks before a U.S. report that economists said will show consumer confidence improved this month, reducing demand for the U.S. currency as a haven.
“Investors will focus on the outcome of today’s Italian bond auction,” Valentin Marinov, a senior foreign-exchange strategist at Citigroup Inc. in London, wrote in a note to clients. “Indications of resilient private demand could help the euro extend its gains further, especially against the dollar and yen.”
The euro was little changed at $1.2829 at 9:57 a.m. in London, having strengthened 0.9 percent this week, the first five-day advance since the period ended Dec. 2. The currency was was little changed at 98.38 yen, after advancing as much as 0.5 percent. The dollar fell 0.1 percent to 76.69 yen.
Italy will sell bonds due in 2014 and 2018 today after the nation’s borrowing costs more than halved at an auction of one- year bills yesterday. Italy’s 10-year yield fell 12 basis points, or 0.12 percentage point, today to 6.52 percent. Spanish 10-year yields dropped four basis points to 5.10 percent.
Stabilization Signs
Draghi said the central bank’s massive injection of cash into the financial system last month is beginning to flow through into credit markets. “There are tentative signs of stabilization of economic activity,” he said in Frankfurt after the ECB’s policy meeting yesterday. Policy makers kept the benchmark rate at a record low of 1 percent after two straight quarter-point reductions.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, dropped 0.1 percent to 80.739, having declined 0.6 percent this week.
The Thomson Reuters/University of Michigan preliminary consumer confidence index rose to 71.5 for January from 69.9 in December, according to a Bloomberg survey before today’s report.
The dollar has depreciated 0.7 percent in the past week, the second-worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro has risen 0.2 percent.
Gains in the euro may be tempered as it approaches levels of so-called resistance at $1.2860 and $1.2933, according to Karen Jones, head of fixed-income, commodity and currency technical analysis at Commerzbank AG in London. These represent last-year’s low and a short-term down channel, she wrote today in a note to clients.
(businessweek.com)
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