Euro Drops Versus Peers on Signs Crisis Damping Sentiment
Tuesday, 22 May 2012 | 14:30
The yen weakened the most in a month against the dollar after Fitch Ratings cut Japan’s credit rating by two levels and placed the country on negative outlook.
Japan’s currency fell versus all its 16 major counterparts as the central bank started a two-day meeting amid speculation it will increase stimulus measures to spur flagging growth. The euro dropped toward a four-month low against the dollar on concern Germany and France are headed for a showdown at a summit tomorrow over how to contain the region’s debt crisis. The pound declined against the dollar after a report showed U.K. inflation slowed more than economists forecast.
“The market is putting the yen under pressure after the Fitch decision,” said Ian Stannard, head of Europe currency strategy at Morgan Stanley in London. “We do not believe that the rebound in the dollar against the yen is sustainable and we think it offers a new selling opportunity. The yen will remain strong despite this news today because of the uncertain global environment.”
The yen weakened 0.5 percent to 79.73 per dollar at 10:30 a.m. London time after falling 0.7 percent, the most since April 18. Japan’s currency depreciated 0.2 percent to 101.81 per euro. The euro declined 0.4 percent to $1.2764. It slid to $1.2642 on May 18, the weakest level since Jan. 16.
Fitch lowered Japan’s long-term rating to A+ from AA, citing growing risks from the country’s rising public debt ratio. Japanese Finance Minister Jun Azumi declined to comment on the downgrade, speaking to reporters in Tokyo.
The yen has gained 6.3 percent over the past month as Europe’s debt crisis intensified, the best performance among the 10 developed-nation currencies tracked by Bloomberg Correlation- Weighted Indexes. The dollar appreciated 3.7 percent and the euro weakened 0.2 percent.
German Chancellor Angela Merkel said yesterday she won’t shy away from disagreeing with French President Francois Hollande at the European Union summit beginning tomorrow in Brussels. Good cooperation “doesn’t exclude differing positions,” Merkel said in Chicago during a meeting of the North Atlantic Treaty Organization.
“Markets are waiting to see what’s going to come out of the leaders’ summit tomorrow,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “There are a number of concerns regarding the crisis and the debate between France and Germany. That’s weighing on confidence and sentiment and the euro.”
The meeting comes after the euro declined 3.6 percent against the dollar this month amid concern Greece will leave the currency bloc after voters flocked to anti-bailout parties at inconclusive May 6 elections.
The pound fell 0.4 percent to $1.5772, and was little changed at 80.96 pence per euro.
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