Euro rallies after German business confidence falls less than forecast

The euro gained against the majority of major currencies after German business confidence fell less than some economists forecast, suggesting the region’s largest economy can withstand the sovereign-debt crisis.

The 17-nation currency traded near a seven-week high against the dollar after German finance minister Wolfgang Schaeuble said Germany and France will create a working group to enhance the region’s fiscal and monetary union.

Sweden’s krona appreciated against all of its 16 major counterparts after retail sales increased more than forecast.

“The German data is helpful for the euro,” David Mann of Standard Chartered said. “It’s still one of the most mainly watched surveys in the eurozone.”

The euro has strengthened 0.3% in the past month among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes.

The euro fluctuated against the dollar after Mr Schaeuble said the working group will prepare solutions in the areas of banking union and a strengthening of a fiscal union and monetary union.

He spoke after meeting with French economy and finance minister Pierre Moscovici in Berlin. Mr Moscovici said the two states will work on “structural” solutions.

German chancellor Angela Merkel told officials in her coalition calling for a Greek exit from the euro to “weigh their words” as she signalled a renewed determination to keep the single currency intact.

The Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, dropped to 102.3 from a revised 103.2 in July.

The lowest prediction in a Bloomberg News survey of 37 economists was for a decline to 101.

ECB president Mario Draghi may provide hints on future policy when he speaks at the Federal Reserve’s annual symposium in Jackson Hole, Wyoming, on Saturday. Fed chairman Ben Bernanke will deliver a speech in Jackson Hole on Friday.

“There is scope for further action by the Federal Reserve to ease financial conditions and strengthen the recovery,” Mr Bernanke wrote in a letter last week to California Republican Darrell Issa, chairman of the House Oversight and Government Reform Committee.

Mr Bernanke probably won’t use his speech to suggest a third round of bond buying, according to economists.


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