Euro Gains Versus Dollar Before German Factory Orders Report

Oct. 6 (Bloomberg) -- The euro advanced for a third day against the dollar before a government report forecast to show German factory orders rose for a sixth month in August, boosting demand for higher-yielding assets.

Europe’s single currency rose against 13 of its 16 major counterparts as Asian stocks extended a global rally. Australia’s dollar fell after a government report showed the nation’s trade deficit was wider than economists had estimated.

“Solid economic data in Germany are good for the euro- zone’s economy, boosting demand for the euro,” said Toshiya Yamauchi, a Tokyo-based manager of the foreign-exchange margin trading department at Ueda Harlow Ltd. “Rising stocks are also encouraging risk taking, and the yen and dollar are under pressure.”

The euro climbed to $1.4659 at 9:57 a.m. in Tokyo from $1.4648 in New York yesterday. It rose to a one-year high of $1.4844 on Sept. 23. The euro fetched 131.08 yen from 131.15 yen. Japan’s currency traded at 89.41 per dollar from 89.53.

The Dollar Index, which the ICE uses to track the dollar against the currencies of six major U.S. trading partners including the euro, dropped 0.1 percent to 76.646. It declined 0.4 percent yesterday.

The Economy Ministry in Berlin is forecast to report Germany’s factory orders advanced 1.1 percent in August following a 3.5 increase in July, according to the median estimate of economists in a Bloomberg News survey. The data is due tomorrow.

Stock Gains

The dollar fell against the euro as the Nikkei 225 Stock Average rose 0.3 percent and the MSCI Asia Pacific Index of regional shares gained 0.6 percent, weakening demand for safe- haven currencies.

“Evidence suggests the global economy is recovering,” said Greg Gibbs, a Sydney-based currency strategist with Royal Bank of Scotland Group Plc. “The dollar may weaken, which has been a trend of recent weeks. Certainly, strong equities enforce that trend.”

The Standard & Poor’s 500 Index yesterday advanced 1.5 percent after Goldman Sachs Group Inc. raised its view on banks including Wells Fargo & Co., JPMorgan Chase & Co. and Bank of America Corp. to “attractive” from “neutral.” A report showed U.S. service industries expanded in September for the first time in a year.

Australia’s dollar weakened versus 14 of 16 major counterparts after the Bureau of Statistics said today the August trade deficit narrowed to A$1.52 billion ($1.33 billion) from a revised A$1.78 billion in July. The median estimate in a Bloomberg survey of 19 economists was for a A$900 million shortfall.

Australia Rates

Australia’s currency fell 0.1 percent to 87.68 U.S. cents, paring yesterday’s 1.5 percent gain. The Reserve Bank of Australia will decide on its benchmark rate at 2:30 p.m. in Sydney.

“If the RBA doesn’t raise rates the Australian dollar will run out of steam and back off toward 87.20 cents,” said Alex Sinton, a senior dealer at ANZ National Bank Ltd. in Auckland. “Our view is they will raise in November and not today.”

Benchmark interest rates are as low as zero in the U.S. and 0.1 percent in Japan, compared with 1 percent in the euro zone and 3 percent Australia.

In carry trades, investors sell currencies in a nation with low borrowing costs and buy assets where returns are higher. The risk in such trades is that currency market moves will erase profits.

‘Bearish Breakdown’

The Australian dollar may drop toward the weakest in nearly 10 months against the New Zealand currency as it risks a “bearish breakdown” on a decline below support at NZ$1.20, according to JPMorgan Chase & Co.

Australia’s currency will target a slide to NZ$1.1675, the least this year, if it falls under “deeper support” at NZ$1.1875, wrote Niall O’Connor, a technical analyst at JPMorgan in New York. The NZ$1.20 level is near the 38.2 percent Fibonacci retracement of the Australian currency’s advance to this year’s peak of NZ$1.2942 on April 30 from last year’s low of NZ$1.0648 reached on Oct. 10, 2008.

“We see another important test of the Australian-New Zealand dollar exchange rate,” O’Connor wrote. The Australian dollar staying below “the NZ$1.2240/60 area will maintain the short-term bearish setup.”