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Jan. 12 (Bloomberg) -- The euro rose the most in a week as European Central Bank President Mario Draghi said he saw signs of stabilization in the economy and after Spain sold almost twice its maximum target at a note auction.
The 17-nation currency appreciated versus 13 of its 16 major counterparts as Italian borrowing costs dropped at a bill auction, spurring optimism the debt crisis is easing. The European Central Bank left its benchmark interest rate unchanged today. The Dollar Index pared losses after a U.S. report showed retail sales rose less than economists forecast, supporting investor appetite for the safety of the greenback.
“The euro is rising because Draghi is not as dovish as he could have been,” said Elizabeth Gregory, a market strategist at Swissquote Bank SA in Geneva. “Given the doom-and-gloom assessment of the euro zone within the media, his take on the situation is a lot more optimistic and balanced.”
The euro rose 0.6 percent to 98.24 yen at 9:11 a.m. in New York, the biggest intraday gain since Jan. 3. The common currency climbed 0.6 percent to $1.2787, after falling to $1.2662 yesterday, the lowest since September 2010. The dollar was little changed at 76.82 yen.
Speaking at a press conference in Frankfurt after the ECB’s decision, Draghi said, “according to some recent survey indicators there are tentative signs of stabilization of economic activity at low levels.” Policy makers left their benchmark rate at 1 percent, in line with the median forecast in a Bloomberg News survey.
Spain, Italy Sales
Spain sold 9.98 billion euros of notes, more than the maximum target of 5 billion euros set for the auction. It issued 4.27 billion euros of new benchmark three-year debt at an average yield of 3.384 percent, down from 5.187 percent at the previous offering on Dec. 1. Italy auctioned 8.5 billion euros of one-year bills at 2.735 percent, versus 5.952 percent at the prior sale on Dec. 12. It also auctioned 136-day securities.
“The Spanish action results are good,” said Jane Foley, a senior currency strategist at Rabobank International in London. “Not only did the government manage to shift more paper than it had indicated, but yields are lower on the three year,” which helps support the euro.
The euro strengthened earlier after a report showed industrial production in the euro-area declined by less than economists forecast.
Output fell 0.1 percent in November from the previous month, when it dropped a revised 0.3 percent, the European Union’s statistics office said. Economists forecast a decline of 0.3 percent, according to a Bloomberg News survey.
Dollar Index
The Dollar Index trimmed its decline after the Commerce Department said U.S. retail sales gained 0.1 percent last month, after rising a revised 0.4 percent in November. Economists forecast a 0.3 percent increase in December, according to a Bloomberg survey.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, fell 0.4 percent to 80.948.
The pound weakened versus the euro as the Bank of England’s Monetary Policy Committee held its key interest rate at 0.5 percent, in line with the forecast of all 53 analysts in a Bloomberg survey. The central bank kept its bond-buying target at 275 billion pounds ($421 billion).
“We expect the Bank of England to expand its quantitative- easing program, possibly next month, to support the economy,” said Ian Stannard, head of European currency strategy at Morgan Stanley in London.
Sterling declined 0.5 percent to 83.31 pence per euro. The currency was little changed at $1.5341 after falling to $1.5279, the weakest level since Oct. 6.
Aussie Gains
Australia’s dollar appreciated as optimism the Chinese government will take steps to spur growth boosted demand for the South Pacific nation’s assets.
Consumer-price inflation in China slowed to 4.1 percent in December from a year earlier, from 4.2 percent the previous month, the National Bureau of Statistics said today. The People’s Bank of China said in November it would cut the reserve requirement ratio for banks by 50 basis points, the first reduction since 2008. China is Australia’s top trading partner.
“Inflation is still cooling and that’s going to provide scope for Chinese authorities to support markets and the economies more,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. in Singapore. “Both the Aussie and kiwi still continue to do quite well against the U.S. dollar.”
The so-called Aussie gained 0.4 percent to $1.0350, and advanced 0.3 percent to 79.51 yen.
----With assistance from Anchalee Worrachate in London, Kristine Aquino in Singapore and Candice Zachariahs in Sydney. Editors: Nicholas Reynolds, Paul Dobson
To contact the reporters on this story: David Goodman in London at dgoodman28@bloomberg.net Keith Jenkins in London at kjenkins3@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
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Any views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsibly for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved.
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