Quentin D. Solano
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Euro Falls to 11-Month Low on ECB Outlook

Euro Falls to 11-Month Low on ECB Outlook; Kiwi, Loonie Advance

The euro fell to its lowest level in almost a year versus the dollar as economists predict data tomorrow will show confidence deteriorated in the region, bolstering bets the European Central Bank will add to stimulus.

The shared currency held a three-day drop against the yen before a report tomorrow forecast by analysts to show German inflation stalled. ECB President Mario Draghi said in an Aug. 22 speech that inflation expectations have declined, before officials set policy next week. New Zealand’s dollar rose after Fonterra Cooperative Group Ltd. maintained its milk-price forecast. The Canadian dollar gained for a second day after Burger King Worldwide Inc. agreed to acquire Tim Hortons Inc.

“The ECB’s preparedness to do large-scale asset purchases is now significant, and policy makers are looking for the ways in which they may be able to do that,” said Greg Gibbs, the Singapore-based head of Asia-Pacific markets strategy at Royal Bank of Scotland Group Plc. “The euro is going to fall further.”

The euro was little changed at $1.3161 as of 6:08 a.m. in London from yesterday, after touching $1.3153, a level not seen since Sept. 6. It slipped 0.1 percent to 136.96 yen from yesterday, when it completed a 0.7 percent, three-day slide. The dollar was unchanged at 104.06 from yesterday, capping a seven-day advance, the longest stretch of gains since July.

Economists surveyed by Bloomberg News predict the European Commission will say tomorrow itsindex of executive and consumer sentiment fell this month to the lowest level since February. A preliminary reading of German inflation due on the same day may show price gains stalled in August from the previous month, based on calculations using a harmonized European Union method.

Dollar Strength

The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 leading global peers, was little changed at 1,030.28 after reaching 1,031.86 yesterday, the most since Feb. 3.

The dollar held gains versus most of its Group of 10 currency counterparts this month after reports yesterday showed a measure of U.S. consumer confidence climbed in August to the highest in almost seven years and orders for durable goods surged in July at a rate almost three times as fast as analysts predicted. Reports this month also showed the U.S. economy added more than 200,000 jobs for a sixth month in July.

Citigroup Inc.’s Economic Surprise Index for the U.S., which measures whether data have been above or below analysts’ forecasts, rose to 27.30 yesterday, the highest since Feb. 5.

Fed Rhetoric

The U.S. economy has made “considerable progress” and the labor market is healing, Federal Reserve Chair Janet Yellen said in an Aug. 22 speech at a conference in Jackson Hole, Wyoming. Her remarks appeared in line with the message from minutes of the July Federal Open Market Committee meeting, which showed officials growing more aware that labor markets are approaching full employment.

“The turn in the rhetoric from the Fed, as well as the heightened expectations for greater accommodation coming from the ECB, has made the dollar really one of the best-performing assets so far in August,” Tim Condon, Singapore-based head of Asian research at ING Groep NV, said in a Bloomberg Television interview. “It’s really on a tear, and I suspect that it has room to run.”

The New Zealand dollar gained against all its major peers after Fonterra, the world’s largest dairy exporter, kept its Farmgate Milk Price forecast at NZ$6 ($5) per kilogram for the 2014/2015 season.

‘Relief Rally’

“The market’s been a little bit nervous about the Fonterra announcement,” said Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong. “It’s a bit of a relief rally for the kiwi that the forecast payout wasn’t cut.”

Whole milk powder prices rose this month for the first time in four auctions, according to results announced by GlobalDairyTrade last week. The price has slumped 44 percent from its peak in February.

The New Zealand dollar climbed 0.4 percent to 83.66 U.S. cents, after falling the previous two days. The currency has declined 4.5 percent since the end of June, the most among its major peers.

The Canadian dollar rose for a second day against the greenback after Burger King agreed to acquire Tim Hortons for about C$12.5 billion ($11.4 billion) in a deal that creates the third-largest fast-food company.

“M&A and the idea of capital flows are obviously something that will always impact the currency markets,” said Chris Weston, chief market strategist in Melbourne at IG Australia, a unit of IG Group Holdings Plc. “I wouldn’t be surprised by some Canadian dollar strength based on that.”

The loonie rose 0.3 percent to C$1.0924 versus its U.S. peer, following a 0.3 percent gain yesterday.