April 10 (Bloomberg) -- The dollar rose against the euro, heading for the biggest weekly gain in three months, on speculation the worst of the financial crisis is over in the world’s largest economy.
The Dollar Index was set for its largest weekly advance since November after Wells Fargo & Co.’s profit beat estimates, triggering the biggest gain on record in the Standard & Poor’s 500 Banks Index. The euro was poised for its largest weekly loss in three months versus the yen on concern the European Central Bank will keep cutting interest rates to spur growth.
“Wells Fargo’s results augur well for U.S. banks’ earnings and point to an easing in the financial crisis,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “The dollar is likely to be bought.”
The dollar climbed to $1.3147 per euro as of 2:30 p.m. in Tokyo from $1.3169 in New York yesterday. It touched $1.3090, the strongest level since March 18. The greenback has risen 2.6 percent this week, the most since the first week of the year. The U.S. currency advanced to 1,326.50 South Korean won from 1,322.45, and strengthened to 1.1581 Swiss francs from 1.1560.
Japan’s currency appreciated to 131.93 per euro from 132.24, and traded at 100.35 versus the dollar from 100.42. It reached 101.44 on April 6, the weakest level since Oct. 21.
Exchange-rate movements may be more volatile than normal as the Easter holiday reduces the volume of trading, Ishikawa said.
Dollar Index
The Dollar Index, which the ICE uses to track the greenback against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, has gained 1.9 percent this week, the most since the five days through Nov. 21. It rose to 85.786 yesterday from 85.361 the previous day.
The index advanced after Wells Fargo, the second-largest U.S. home lender, said yesterday first-quarter net income surged because of “strong” revenue from Wachovia Corp., which it acquired last year.
Goldman Sachs Group Inc. will release its first-quarter results on April 14. The New York-based company is considering a multibillion dollar share sale to help repay a $10 billion government loan, the Wall Street Journal reported, citing people familiar with the matter.
Treasury yields this week climbed to near the highest since the Federal Reserve started buying debt as the economy showed signs of improving and the U.S. sold $59 billion in debt. The 10-year yield rose four basis points, or 0.04 percentage point, to 2.92 percent, according to BGCantor Market Data. The Securities Industry and Financial Markets Association recommended trading of cash Treasuries shut worldwide today for Good Friday.
ECB Rates
The euro fell for a second day against the dollar on speculation the European Central Bank will next month lower its benchmark borrowing rate for a fourth time this year.
ECB council member Nout Wellink said the central bank can make additional cuts to its 1.25 percent rate and is considering other measures to spur lending and boost the economy. Fellow member Ewald Nowotny said cutting the rate below 1 percent was still open for debate and it would be “sensible” for the bank to buy corporate debt as it fights for an economic recovery.
“There seems to be a growing consensus for more rate reductions” from the ECB, said Akifumi Uchida, deputy general manager of the marketing unit in Tokyo at Sumitomo Trust & Banking Co., Japan’s fifth-largest bank. “The euro will probably weaken.”
Investors raised bets the ECB will lower borrowing costs at its May 7 meeting. The yield on the three-month Euribor interest-rate futures contract for May delivery fell to 1.31 percent yesterday from 1.36 percent a week earlier, according to data compiled by Bloomberg.
‘Room for Lowering’
“There is some room for lowering the interest rate,” Wellink, who also heads the Dutch central bank, said yesterday in an interview in Leiden, The Netherlands. “There is also room for other measures, on which we will decide soon,” he said, declining to specify what action the bank might take.
The euro may extend its decline to $1.25 after dropping below the March 30 low of $1.3114, Sumitomo Trust’s Uchida said.
The $1.3114 level represents so-called support on a horizontal trend line of a descending triangle, he said. The trend line connects the March 30 low and the April 9 low, based on data compiled by Bloomberg. A descending triangle consists of horizontal and descending trend lines.
The yen extended this week’s gains versus the 16-nation currency as Asian stocks trimmed an earlier advance, prompting investors to reduce holdings of higher-yielding assets.
Stocks Pare Gains
The Nikkei 225 Stock Average was little changed after earlier rising as much as 1.7 percent. The MSCI Asia-Pacific Index of regional shares pared its gain to 0.4 percent following an earlier 1 percent increase.
“The Japanese stock market isn’t reacting as positively as the U.S.’s,” said Ryohei Muramatsu, Tokyo-based manager of Group Treasury Asia at Commerzbank AG, Germany’s second-biggest lender. “The pullback in equities here is leading to some buying of the yen.”
Japan’s currency may strengthen to 131.30 per euro and 100 against the dollar today, he said.
To contact the reporters on this story: Ron Harui in Singapore at rharui@bloomberg.net.
