By Ron Harui
The single currency also dropped against the dollar before a German report forecast to show investor confidence in Europe’s largest economy declined to the lowest in almost a year. The Australian dollar fell after the nation’s central bank said the European situation would weigh on the global growth outlook. Malaysia’s ringgit led Asian currencies lower on concern investors will shun higher-yielding assets.
“We remain bearish on the euro given that the euro-zone debt crisis is unlikely to be resolved anytime soon,” said Gareth Berry, a currency strategist in Singapore at UBS AG, the world’s second-biggest foreign-exchange trader. “The austerity measures which are designed to deal with the crisis will likely act as a drag on future growth. We continue to forecast the euro at $1.15 in three months.”
The euro dropped to 111.48 yen as of 7:09 a.m. in London from 111.92 yesterday, when it climbed to 112.87, the highest level since June 4. The euro bought $1.2219 from $1.2221. The yen gained to 91.37 per dollar from 91.58.
Australia’s dollar slid 0.4 percent to 85.55 U.S. cents, the first drop in six days, and lost 0.6 percent to 78.16 yen.
BOJ Meeting
Japan’s currency was little changed after the central bank kept its benchmark interest rate at 0.1 percent at the end of its two-day meeting today. The Bank of Japan said it will offer as much as 3 trillion yen ($33 billion) for a new program aimed at expanding credit available to companies.
German investor and analyst expectations fell to 42 in June, the least since July 2009, from 45.8 in May, according to a Bloomberg survey before the ZEW Center for European Economic Research releases the index today. The gauge aims to predict developments six months ahead.
“The debt crisis will slowly impact on Germany,” said Alexander Koch, an economist at UniCredit Group in Munich. “The ZEW is forward-looking, and toward the end of the year Europe’s austerity measures will be hurting both exports and domestic demand.”
Moody’s Investors Service yesterday cut Greece’s credit rating to junk, citing “substantial” risks to the nation’s economic growth from the austerity measures tied to a 110 billion-euro ($134 billion) aid package from the European Union and the International Monetary Fund.
RBA Minutes
The Australian dollar weakened versus most of its counterparts after the central bank said “the situation in Europe had deteriorated significantly over the previous month,” fueling speculation it may keep interest rates unchanged until at least the fourth quarter.
Reserve Bank of Australia Governor Glenn Stevens left borrowing costs at 4.50 percent at the most recent policy meeting on June 1. Policy makers said today in minutes from the meeting that previous rate increases gave them “flexibility” to examine the impact of European events.
“The bank will be on hold for at least another month or two and the Aussie has taken a bit of a step back,” said Derek Mumford, a Sydney-based senior consultant at HiFX, a foreign exchange risk management firm. “We haven’t seen the last of the risk aversion in the market.”
There’s a more than 70 percent chance the RBA will maintain rates at 4.5 percent through to the end of September, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange.
Malaysia’s ringgit declined for the first time in five days after Moody’s yesterday cut Greece’s sovereign rating by four levels to Ba1 from A3.
“There is a lot of pessimism priced into the market, and the latest downgrade of Greece” has revived it, said Sim Moh Siong, a Singapore-based currency strategist at Bank of Singapore Ltd.
The ringgit dropped 0.5 percent to 3.2640 per dollar, according to data compiled by Bloomberg.
To contact the reporters on this story: Ron Harui in Singapore at rharui@bloomberg.net.
Last Updated: June 15, 2010 02:11 EDT
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