Euro candidate currencies gain on shared currency

Story link: Euro candidate currencies gain on shared currency

After gaining early in the session after China raised its interest rates on borrowing and lending by 27 basis points over the weekend, the Japanese yen weakened later in the session on gains by Asian equities markets. The yen dropped 0.5 percent to ¥156.30 versus the euro, while it fell 0.7 percent against the US dollar to ¥117.50 and was 0.8 percent lower to ¥228.70 in relation to sterling in early afternoon trade in New York.

Meanwhile, the rise in Chinese interest rates sent the Renminbi to its highest level against the greenback since its revaluation in July 2005, to Rmb 7.3300. The interest rate rise sent borrowing rates to 2.79 percent, while lending rates rose to 6.39 percent, but the move seemed not to have much effect on Chinese equity markets.

Sterling was stronger as Rightmove (LSE: RMV), a price comparison service in the UK, reported that UK house prices were up by 1.5 percent in March, bringing the annual gain to 12.2 percent and raising the chances that the Bank of England will raise interest rates when its Monetary Policy Committee meets next. The UK currency added 0.2 percent in relation to the euro, to £0.6835, while it gained 0.3 percent to $1.9460 versus the US dollar.

The US currency, despite declines against the yen and sterling, managed to hold steady in relation to the euro, trading at $1.3350 ahead of the next meeting of the US Federal Reserve, scheduled for Wednesday. The Fed is widely expected to leave US interest rates at 5.25 percent for another month. Some analysts expect that the Fed will signal that it is still worried about inflation due to a gain in core inflation and unit labor costs, but others expect a more moderate statement based on declines in retail sales and the housing market.

Currencies that are under consideration for joining the euro strengthened against the shared currency. The Slovak koruna was up 3.2 percent versus the euro to SK32.84, an record high, after the European Commission approved a revaluation of the currency’s parity in ERM-2, the exchange rate mechanism that leads up to euro adoption. The Commission revalued the Slovak currency by 8.5 percent, signaling that euro membership is likely. Elsewhere, the Czech koruna gained 0.4 percent in relation to the euro, to Kc27.73, while the Polish zloty added 0.6 percent to 3.8660zlotys and the Hungarian forint was 1.5 percent higher to Ft245.46.