Euro Weakens for Eighth Day on Greece Stalemate, Spanish Yields
Thursday, 10 May 2012 | 01:01
The euro weakened against the dollar for an eighth day, the longest stretch since September 2008, as Greece’s struggle to form a new government fueled concern the nation will leave Europe’s currency union.
The 17-nation currency pared losses after officials said Europe’s bailout fund will pay the next installment of aid to Greece. The euro fell earlier as Spain’s 10-year bond yields climbed back above 6 percent. The dollar and yen rose against most of their major counterparts on increased demand for haven assets. Canada’s dollar dropped to a three-month low as oil declined for a sixth day.
“The euro is lower today because of this uncertainty around Greece,” said Eric Viloria, senior currency strategist at Gain Capital Group LLC in New York. “There’s been increasing rhetoric from other European officials with regards to Greece, saying they need to decide whether or not they’re going to stay in the euro zone.”
The euro fell 0.6 percent to $1.2929 at 5 p.m. New York time and touched $1.2912, the weakest since Jan. 23. The shared currency weakened 0.9 percent to 102.97 yen after reaching 102.76, the lowest since Feb. 16. The yen gained 0.3 percent to 79.64 per dollar.
The Standard & Poor’s 500 Index (SPX) fell 0.7 percent and crude oil lost 0.6 percent to $96.45 a barrel.
The Canadian dollar fell to C$1.0063, the lowest level since Jan. 30, before trading down 0.4 percent at C$1.0026. Oil is Canada’s largest export.
‘Uncertainty in Greece’
Greece’s political turmoil looked set to enter a fourth day with coalition talks deadlocked, raising the possibility that another election will have to be held as early as next month.
Evangelos Venizelos, the socialist Pasok leader and former finance minister, said he’ll try to form a government when he receives a three-day mandate from President Karolos Papoulias tomorrow. Pasok today rejected terms for a government set by Alexis Tsipras of Greece’s anti-bailout Syriza party which then gave up its bid to build a coalition.
The European Financial Stability Facility’s board of directors confirmed the release of 5.2 billion euros ($6.7 billion) from a first installment of 39.4 billion euros by the end of June, the EFSF said in an e-mailed statement today.
“It’s a function of the uncertainty in Greece and the credit stress in Spain,” said Boris Schlossberg, director of research at online currency trader GFT Forex in New York. “The Greeks are not going to do any more austerity. If the Spanish yield goes to 7 percent, it’s going to be getting into the red zone -- a warning zone for the euro.”
The yields on Spanish 10-year bonds reached 6.095 percent today, rising above 6 percent for the first time since April 27.
‘They Will Decide’
Euro area leaders from the European Central Bank’s Joerg Asmussen to German Finance Minister Wolfgang Schaeuble have begun to raise doubts that Greece can stay in the monetary union.
“If Greece decides not to stay in the euro zone, we cannot force Greece,” German Finance Minister Wolfgang Schaeuble said at a conference sponsored by German broadcaster WDR in Brussels today. “They will decide whether to stay in the euro zone or not.”
Asmussen, a member of the ECB’s executive board, told Handelsblatt that for Greece “there is no alternative to the agreed consolidation program if it wants to remain a member of the euro zone.”
The euro has weakened 4 percent over the past six months, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 1.6 percent, and the yen dropped 1.2 percent.
The yen strengthened against all of it 16 major counterparts, and the dollar advanced versus all but the yen, amid speculation the global economy is stalling, boosting demand for safer assets.
Growth in German exports slowed to 0.9 percent in March from 1.5 percent in February, the Federal Statistics Office in Wiesbaden said today. U.S. initial jobless claims climbed by 4,000 to 369,000 last week, according to a Bloomberg News survey before the Labor Department report tomorrow.
South Africa’s rand and Mexico’s peso were among the biggest decliners of the 16 major currencies tracked by Bloomberg. The rand weakened 1.3 percent to 7.9931 per dollar and the peso dropped 1 percent to 13.4993.
Sterling slipped 0.2 percent to $1.6128 and rose 0.4 percent to 80.17 pence per euro before the Bank of England’s Monetary Policy Committee decides tomorrow whether to add more stimulus to its existing 325 billion pounds ($485 billion) of bond purchases.
‘Room to Move’
Sales at U.K. stores open at least 12 months, measured by value, declined 3.3 percent from a year earlier, the London- based British Retail Consortium said today. That’s the biggest monthly drop since March 2011. Including stores open less than 12 months, sales decreased 1 percent.
Australia’s dollar weakened for a second day versus its U.S. counterpart after Prime Minister Julia Gillard said returning the budget to surplus will give the central bank “maximum room to move” in setting interest rates. The Reserve Bank of Australia cut interest rates by 0.5 percent to 3.75 percent May 1.
The so-called Aussie weakened 0.7 percent to $1.0051 after touching $1.0021, the lowest since Dec. 20, the last time it traded at parity with the greenback.
The Dollar Index (DXY), which IntercontinentalExchange Inc. uses to measure the currency against those of six major U.S. trade partners, is approaching its so-called double bottom neckline at 80.18, according to Citigroup Inc. A breakthrough there would drive the gauge back up to January highs, Tom Fitzpatrick, chief technical analyst at Citigroup Inc. in New York, wrote in a research note.
The Dollar Index added 0.5 percent to 80.155, rising for an eighth straight day in its longest such streak since September 2008. It strengthened to as high as 81.784 in January. It may also follow a pattern seen in September and appreciate 6 percent over the next five weeks to 84.5, Fitzpatrick wrote.