European focus: Europe’s currency fell
Europe’s currency fell to an almost one-week low against the dollar yesterday after Germany’s finance minister and Standard & Poor’s said Greece may need to restructure debt to avoid defaulting. The euro has still gained 8 percent versus the dollar this year on bets accelerating inflation will prompt euro-area policy makers to raise interest rates, even as peripheral nations struggle to reduce their debt burdens.
The European Central Bank raised its benchmark refinancing rate last week to 1.25 percent from a record low 1 percent and indicated further increases may follow. The Fed has kept its target rate for overnight lending between banks at zero to 0.25 percent since December 2008.
The euro briefly pared its decline today after a report showed inflation in the 17-nation euro-region accelerated more than forecast to 2.7 percent in March, the fastest in more than two years.
The U.S. consumer-price index climbed 0.5 percent in March, matching the previous month’s reading, which was the biggest gain since June 2009, a survey showed before the Labor Department data today. Excluding volatile food and fuel costs, so-called core prices may have advanced 0.2 percent in March for a third month, another survey showed.
Britain’s pound rose for a third day against the euro, adding 0.3 percent to 88.38 pence to the shared currency while it gained less-than 0.1 percent to $1.6342. Bank of England policy maker Andrew Sentance said in an interview with Bloomberg yesterday that an interest rate increase to boost the currency wouldn’t be “unwelcome” as a slowdown in inflation may prove short-lived.