Stronger euro holds no threat to euro zone growth: Bundesbank

Bundesbank head Jens Weidmann said Europe’s policymakers must monitor currency developments closely as they seek to reduce inflation in the euro zone. (Reuters)
Updated 08 February 2018
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Stronger euro holds no threat to euro zone growth: Bundesbank

FRANKFURT: The increasing strength of the euro against other currencies such as the dollar does not threaten to slow mounting growth in the euro area, Germany’s central bank chief said.
“The recent appreciation in the euro seems unlikely to jeopardize the expansion,” Bundesbank head Jens Weidmann said in a speech.
“It is, at least in part, rather a reaction to the brighter growth prospects of the euro area,” he said.
Weidmann’s response to the stronger single currency is more relaxed than the common position of the European Central Bank, where he sits on the governing council.
“Downside risks” to growth in the euro zone “relate primarily to global factors, including developments in foreign exchange markets,” ECB President Mario Draghi said last month.
Since mid-December, the euro has gained around 4 percent against the dollar and 1 percent against the yen.
Looking back further over the past year, the single currency’s gains amount to 15 percent against the greenback and 10 percent against the Japanese unit.
As in the ECB’s common position, Weidmann acknowledges that policymakers must “monitor closely” developments on currency markets for their potential impact on the central bank’s efforts to push inflation toward just under 2 percent.
A stronger euro directly saps inflation by making imports cheaper.
By also making euro area products more expensive abroad it can indirectly slow price growth by limiting economic expansion.
But “recent research suggests the impact of exchange rate movements on inflation has declined,” Weidmann noted.
The Bundesbank chief also took the opportunity to burnish his credentials as a so-called “hawk” in favor of reducing ECB support to the economy — in the shape of mass bond purchases and low interest rates — as it strengthens.
Frankfurt policymakers have waved through more than €2.3 trillion ($2.8 trillion) of government and corporate bond purchases since March 2015, with the program currently slated to end in September once it hits around €2.5 trillion.
“If the expansion progresses as currently expected, substantial net purchases beyond the announced amount do not seem to be required,” Weidmann said.
In a question-and-answer session on Twitter, ECB chief economist Peter Praet downplayed differences on the governing council about the bond-buying scheme, saying members agree on their objectives and “discussions are more on tactics.”


Saudi Arabia flat, Drake and Scull International lifts Dubai

Updated 20 May 2018
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Saudi Arabia flat, Drake and Scull International lifts Dubai

  • The Saudi index was little changed, while the Dubai index closed up 0.2 percent
  • Shares in Saudi oil and gas and petrochemical companies were mostly down

DUBAI: Gulf stock markets were mostly flat on Sunday amid low trading volumes and a lack of significant events.
The Saudi index was little changed, while the Dubai index closed up 0.2 percent. The rest of the region closed down, but with losses limited.
Global stocks dipped last Friday because of persistent concerns over trade tensions. Oil prices also slipped on Friday, with Brent crude futures falling 79 cents, or 1 percent, to settle at $78.51 a barrel. But the dip came after a sixth week of gains, with prices breaking through $80 a barrel last week for the first time since November 2014.
Shares in Saudi oil and gas and petrochemical companies were mostly down on Sunday, despite some gains earlier in the day. Blue-chip Saudi Basic Industries (SABIC) shed 0.2 percent, while Saudi Kayan Petrochemical edged down 0.1 percent.
Most of the trading was concentrated on real estate developer Dar Al Arkan Real Estate Development Co., which was up 0.4 percent, and Alinma Bank, down 0.1 percent.
Real estate developer Jabal Omar Development was among the best performers, up 3.9 percent at the close – and it had been up more than 6 percent in earlier trading – after announcing an agreement with Albilad Capital to sell 90 housing units for 1.1 billion riyals ($293 million).
In Dubai, the index was lifted by gains of 2 percent and 1.7 percent by Dubai Financial Market and building contractor Drake and Scull International, respectively.
Drake and Scull International, by far the most traded stock in the market, reported last week a net profit attributable to shareholders of 16.2 million dirhams ($4.4 million) for the first quarter, swinging from a net loss of 722.5 million dirhams in the corresponding period last year.
Heavyweight Emaar Properties climbed 0.2 percent after a weak start earlier on Sunday.
The Abu Dhabi index edged down 0.1 percent, pressured by Sharjah Cement and Industrial Development Company, which lost 4.8 percent and was the most traded stock.
The Egyptian index lost 0.6 percent, but the most traded stock was Orascom Telecom Media & Technology Holding , which gained 2.4 percent.