Euro, Pound Rise After Report Shows U.K. Housing Stabilizing

June 9 -- The euro and the pound advanced against the dollar after a report indicated the U.K. housing market showed signs of “stabilizing” in May.

The smallest balance of real-estate agents and surveyors in 18 months reported price declines, the Royal Institution of Chartered Surveyors said in a report today. The number of respondents in the monthly survey saying home values fell exceeded those reporting increases by 44.1 percentage points, the best reading since November 2007, RICS said in London. The data came after Nobel Prize-winning economist Paul Krugman said the U.S. economy will emerge from recession by September.

The U.K.’s housing data “added to the confidence that the global economy is bottoming out,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “As optimism boosts risk appetite and demand for higher yields, lower-yielding currencies like the yen and dollar will come under pressure.”

The euro rose to $1.3923 per dollar as of 9:08 a.m. in Tokyo from $1.3900 yesterday in New York. The 16-nation currency climbed to 137.13 yen from 136.89 yen. The pound gained to $1.6078 from $1.6051. The yen traded at 98.51 per dollar from 98.49 yesterday.

Higher Rates

Losses in the dollar were tempered as investors raised bets the Federal Reserve will increase its target lending rate by the end of the year as the world’s largest economy recovers.

“I would not be surprised if the official end of the U.S. recession ends up being, in retrospect, dated sometime this summer,” Krugman said in a lecture yesterday at the London School of Economics. “Things seem to be getting worse more slowly. There’s some reason to think that we’re stabilizing.”

CME Group futures showed yesterday a 57 percent chance the Fed will increase the target rate for overnight lending between banks to at least 0.5 percent by its November meeting, compared with 26 percent odds a week ago. Investors raised bets the central bank will boost interest rates after the Labor Department said June 5 that U.S. payrolls fell by 345,000 last month, the smallest decrease in eight months.

“As Krugman signaled, people are becoming more confident about the prospects for the U.S. economy and interest rates there,” said Shoichi Handa, a senior currency dealer in Tokyo at SBI Liquidity Markets Co., a unit of financier SBI Holdings Inc. “These positive perceptions will support capital flow back into dollar-denominated assets.”

Sales at U.S. retailers increased in May for the first time in three months as demand for cars picked up, according to a Bloomberg News survey before the government report on June 11. Retail sales climbed 0.5 percent, according to the median estimate of the survey.