Euro Climbs Sharply After Week of Heavy Falls

By Tommy Stubbington 

        The euro climbed sharply Thursday after touching a new 12-year low, providing some respite from a week of heavy falls.
        The euro was 0.6% higher against the dollar at $1.0613 in early trade, up from $1.0494 in Asian trading hours, its weakest level since March 2003.
        Analysts said there was no specific news driving the rebound, but the pace of decline this week meant a short-term recovery had been likely. The euro has remained more than 5% lower against the buck since the start of the week.
        "We are seeing a little bit of a moderation. But investors don't want to be long euros, and we are clearly in a dollar bull run," said Steven Saywell, global head of foreign exchange strategy at BNP Paribas.
        Data showing solid U.S. retail sales later Thursday would provide new impetus to the buck, Mr. Saywell added.
        The losses for the euro have come as the European Central Bank on Monday kicked off its long-awaited bond-buying stimulus program. ECB purchases have driven down bond yields in the euro area, boosting the relative attractiveness of assets elsewhere and weighing down the currency as some investors shift their money outside the bloc.
        Bond yields in the eurozone continued to trade at or close to all-time lows on Thursday. Germany's 10-year yield was a shade under 0.20%. Spanish, Italian, and Portuguese bond yields all sank to fresh record lows. Yields fall as prices rise.
        Many investors and analysts are forecasting further declines, but some think yields may begin to rise, despite ECB demand, if investors chase bigger returns elsewhere.
        "The yields offered by euro area rates markets are starting to look increasingly unattractive relative to other markets. This strengthens our view that yields in the euro area will start rising in the year ahead," said Justin Knight, a fixed income strategist at UBS.
        European equity markets were quiet Thursday, with the Stoxx Europe 600 0.2% higher in early trade. Germany's DAX and France's CAC 40 fell 0.1%, while the U.K.'s FTSE 100 was up 0.6%.
        In commodity markets, Brent crude oil rose 0.9% to $58.41 a barrel, and gold climbed 0.9% to $1,160.40 an ounce.
        Write to Tommy Stubbington at tommy.stubbington@wsj.com
        (END) Dow Jones Newswires

        March 12, 2015 05:09 ET (09:09 GMT)

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