Euro May Rise to 173 Yen, Mizuho Corporate Bank's Fukui Says
By Kosuke Goto
June 4 (Bloomberg) -- The euro may strengthen to a record 173 yen this year as a strengthening economy and rising interest rates attract investment into the region's assets, said Masaki Fukui at Mizuho Corporate Bank Ltd. in Tokyo.
Europe's currency touched a record high of 164.29 yen May 29, on speculation European Central Bank officials this week will raise borrowing costs and signal they will keep rising. The euro has strengthened almost 14 percent against the yen in the past year as the rate differential between the two economies widened.
``The euro remains firm on prospects of further rate increases,'' Tokyo-based Fukui, a senior economist and currency analyst at a unit of Japan's second-largest lender, said in an interview today. ``I expect the ECB to raise rates three more times, including this week.''
The euro bought 164.01 yen at 10:40 a.m. in Tokyo from 164.14 June 1. It was at $1.3450 against the dollar from $1.3449.
Signs of a strengthening economy are encouraging traders to place bets on further rate increases by the ECB, while the Bank of Japan is unlikely to raise rates from 0.5 percent before August, Fukui said.
European policy makers meet to discuss borrowing costs on June 6. They are expected to raise rates a quarter point to 4 percent, economists unanimously predicted in a Bloomberg survey.
Euribor futures contracts show investors have increased bets ECB rates will rise by 75 basis points to 4.5 percent this year. The implied rate on the December contract has risen 20 basis points in the past month to 4.56 percent. The contracts settle to the three-month interbank offered rate for the euro, which has averaged about 16 basis points above the ECB's benchmark since 1999.
``We are looking for three further rate hikes this year,'' said Sue Trinh, a currency strategist at RBC Capital Markets in Sydney. ``One this week, one in September and one in December. That would put a bullish slant on the euro.''
The euro may rise to $1.36 by June 30 and $1.38 by year- end, Trinh said.
By Kosuke Goto
June 4 (Bloomberg) -- The euro may strengthen to a record 173 yen this year as a strengthening economy and rising interest rates attract investment into the region's assets, said Masaki Fukui at Mizuho Corporate Bank Ltd. in Tokyo.
Europe's currency touched a record high of 164.29 yen May 29, on speculation European Central Bank officials this week will raise borrowing costs and signal they will keep rising. The euro has strengthened almost 14 percent against the yen in the past year as the rate differential between the two economies widened.
``The euro remains firm on prospects of further rate increases,'' Tokyo-based Fukui, a senior economist and currency analyst at a unit of Japan's second-largest lender, said in an interview today. ``I expect the ECB to raise rates three more times, including this week.''
The euro bought 164.01 yen at 10:40 a.m. in Tokyo from 164.14 June 1. It was at $1.3450 against the dollar from $1.3449.
Signs of a strengthening economy are encouraging traders to place bets on further rate increases by the ECB, while the Bank of Japan is unlikely to raise rates from 0.5 percent before August, Fukui said.
European policy makers meet to discuss borrowing costs on June 6. They are expected to raise rates a quarter point to 4 percent, economists unanimously predicted in a Bloomberg survey.
Euribor futures contracts show investors have increased bets ECB rates will rise by 75 basis points to 4.5 percent this year. The implied rate on the December contract has risen 20 basis points in the past month to 4.56 percent. The contracts settle to the three-month interbank offered rate for the euro, which has averaged about 16 basis points above the ECB's benchmark since 1999.
``We are looking for three further rate hikes this year,'' said Sue Trinh, a currency strategist at RBC Capital Markets in Sydney. ``One this week, one in September and one in December. That would put a bullish slant on the euro.''
The euro may rise to $1.36 by June 30 and $1.38 by year- end, Trinh said.
**Original Source = Bloomberg.com**
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