19 Aug 2009
Aug. 19 (Bloomberg) -- The euro rose from near a one-week low against the pound on speculation a European report will show manufacturing and service industries contracted at a slower pace, adding to signs the 16-nation region's recession is abating.Europe's currency gained against 11 of its 16 major counterparts as economists said the composite index of both industries rose to 48 in August from 47 in July. Markit Economics will release the gauge on Aug. 21. The yen advanced against the dollar and euro as equities in China and Japan dropped, boosting demand for the currency as a refuge.
"There is a growing recognition that the economies around the world, including those in the euro-zone, are bottoming out," said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. "This is positive for the euro."
The euro gained 0.2 percent to 85.56 British pence at 12:46 p.m. in Tokyo from 85.37 yesterday in New York, when it reached 85.24 pence, the lowest since Aug. 10. Europe's currency was at $1.4137 from $1.4136. The dollar fetched 94.60 yen from 94.69.
Japan's Nikkei 225 Stock Average lost 0.2 percent. The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, dropped 0.5 percent.
"Risk aversion, shown in a drop in stocks, is causing the yen to be bought," said Masashi Hashimoto, a senior analyst at Bank of Tokyo Mitsubishi UFJ Ltd., a unit of Japan's biggest publicly traded bank. "Signs China's economy is faltering are weighing down on the global economic outlook."
The yen may strengthen to as high as 94 per dollar today, Hashimoto said.
Pimco Report
The U.S. currency will drop the most against emerging- market counterparts, Curtis A. Mewbourne, a Pimco portfolio manager, wrote in a report on the company's Web site.
"Investors should consider whether it makes sense to take advantage of any periods of U.S. dollar strength to diversify their currency exposure," Mewbourne wrote in his August Emerging Markets Watch report.
The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners including the euro and yen, was at 78.972 from 78.937 yesterday.
