Politics

FOREX-Euro surges in surprise move driven by flows linked to Japan

* Euro jumps in surprise late Asian move

* Dollar index sags, weighed down by euro's strength

* Sterling up but lacking direction after Brexit delay

By Tom Finn

LONDON, April 12 (Reuters) - The euro rose sharply on Fridayin a move dealers said may have been driven by anticipatedcurrency demand arising from a Japanese bank's plans to purchasea German multi-billion dollar aviation finance business.

The common currency jumped late in Friday's Asia session andthen extended gains in the European session to a 2-1/2-weekhigh.

Markets are often quiet in the hours before European tradeopens and thin liquidity has in recent months caused suddenjolts or "flash crashes" in major currencies including the Swissfranc.

Those types of moves are less common in the heavily-tradedeuro-dollar currency pair which has a daily turnover of over $1trillion.

The pair has traded in a narrow range at a time whenvolatility in foreign exchange markets is at a multi-year low,said Elisabeth Andreae, an FX strategist at Commerzbank.

"It is remarkable that particularly in this marketenvironment we see jumps even in EUR-USD typically during Asiantrading times. This morning we saw a move from $1.1260 to$1.1290 in one fell swoop," she said.

Dealers said speculators were buying the euro in response toreports on Mitsubishi UFJ Financial Group's8306.T plannedpurchase of the aviation financing business of Germany's DZBank. As of June last year, the portfolio of that business stoodat 5.6 billion euros.

The transaction was announced on March 1 and MUFG said theit was expected to close after June.

The euro rose 0.6 percent to $1.1318EUR= , its highestsince March 26. The common currency also advanced about 0.8percent to 126.69 yenEURJPY= , its strongest since March 20.

The single currency has remained in a range of $1.12-$1.16in 2019 despite a slowdown in the euro zone economy promptingnew stimulus from the European Central Bank.

"We think the euro is about to become 'interesting' again.As is often the case, range-trading can mask an underlyingbuild-up of pressures that get released eventually," saidVassili Serebriakov, a currency strategist at Credit Agricole inNew York.

"We acknowledge the ECB's dovishness but are inclined to seegrowth (in Europe and globally) as the more forward-looking, andbullish, driver of the euro," he said.

This week both France and Italy reported higher thanexpected industrial output in February, offering positive signsfor the bloc after some downbeat data.

Pressured by the stronger euro, the dollar index against abasket of six major currencies .DXY was down 0.4 percent at96.828, giving up most of the previous day's gains.

With the dollar broadly lower, the pound rose 0.2 percent to$1.3078 GBP=D3 to cancel out most of the previous day'slosses.

Volatility for sterling plunged after a midweek deal at anemergency European Union summit to postpone Britain's exit fromthe bloc to Oct. 31. The deal meant Britain would not crash outthis week without an agreement. GBP/ (Editing by Keith Weir and Andrew Cawthorne) ((tom.finn@tr.com; +44 2075427508 ; Reuters Messaging:tom.finn.reuters.com@reuters.net))


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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