By - Jan 10, 2011 11:02 AM GMT+0800
The euro traded near a three-month low against the dollar on speculation European nations will struggle to raise funds, diminishing the allure of their assets. Photographer: Chris Ratcliffe/Bloomberg
Jan. 7 (Bloomberg) -- Monica Fan, senior currency strategist at State Street Global Advisors, talks about the sovereign debt crisis in Europe and her forecast for the euro. The euro headed for a weekly loss versus 14 of its 16 major counterparts amid concern that European governments will struggle to raise funds as the region's fiscal crisis lingers. Fan speaks in London with Maryam Nemazee on Bloomberg Television's "Countdown." (Source: Bloomberg)
Jan. 6 (Bloomberg) -- Axel Merk, president and chief investment officer at Merk Investments LLC, talks about the outlook for the euro and dollar. The dollar appreciated to a level stronger than $1.30 against the euro for the first time since early December before a report tomorrow forecast to show employers added jobs for a third month. The euro dropped below the 200-day moving average versus the dollar as the European Union discussed spreading the cost of bank failures. Merk speaks with Matt Miller and Carol Massar on Bloomberg Television's "Street Smart." (Source: Bloomberg)
The euro traded near its lowest level in more than three months against the yen on concern European nations will struggle to raise funds, diminishing the allure of assets in the region.
Europe’s currency was also close to a three-month low versus the dollar after a slide in Portuguese government bonds last week dimmed the outlook for debt auctions over the next three days in the nation, Spain and Italy. Australia’s dollar reversed losses after a report showed today retail sales rebounded in November. South Korea’s won traded near the strongest in eight weeks after central bank data showed producer price inflation accelerated to a two-year high.
“It looks as though the market is pricing in some further deterioration in the sovereign debt story,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “Obviously the Portugal auction on Wednesday will be closely watched. I see euro weakness continuing.”
The euro traded at 107.26 yen as of 11:51 a.m. in Tokyo from 107.32 yen in New York on Jan. 7, when it touched 106.95 yen, the lowest level since Sept. 14. It was at $1.2922 from $1.2907, after earlier reaching $1.2867, the weakest since Sept. 14. The yen fetched 83.01 per dollar from 83.15. Financial markets in Japan are closed today for a public holiday.
Portugal will sell 2014 and 2020 bonds on Jan. 12. Italy will offer 2014 bonds and Spain will auction 2016 debt on Jan. 13, according to data compiled by Bloomberg. The yield on Portuguese 10-year bonds climbed to as high as 7.19 percent on Jan. 7, the most since Nov. 11. The yield on Spain’s 10-year bonds reached 5.54 percent last week, the highest since Dec. 21.
Portugal Pressure
UBS AG, the world’s second-largest foreign-exchange trader, recommended today that investors sell the euro at $1.2900, with a target of $1.2450 and a stop-loss order at $1.3150.
“The markets are likely to increasingly worry about Portugal’s upcoming bond auction on Wednesday and Spain’s on Thursday,” Gareth Berry, a Singapore-based currency strategist at UBS, wrote in a note today.
A stop loss is an automatic instruction to either buy or sell a currency at a certain level to limit losses in case a bet goes the wrong way.
Germany and France will pressure Portugal to seek aid from the European bailout fund soon to prevent contagion to other countries such as Spain and Belgium, Der Spiegel reported on Jan. 8, without saying where it got the information.
Australia Sales
“Experts” in the French and German governments believe the southern European country won’t be able to raise money on capital markets for much longer, the German magazine said in a preview of a report to be published in its next edition. A German Finance Ministry spokesman said yesterday his nation isn’t pressing Portugal to tap the rescue fund.
Australia’s dollar was supported after the Bureau of Statistics said retail sales rose 0.3 percent in November after a revised 0.8 percent drop in October. That matched the median forecast of economists in a Bloomberg survey.
“Australian retail sales numbers today did not surprise, however, an upward revision on the previous month’s numbers sent the Australian dollar 20 ticks higher from 99.50 to 99.70,” Tim Waterer, a foreign-exchange dealer at CMC Markets in Sydney, wrote in an e-mailed note.
Reserve Bank of Australia Governor Glenn Stevens left the overnight cash rate target at 4.75 percent last month after seven increases since October 2009. Higher borrowing costs helped slow third-quarter growth and savings have risen, even as energy and mining investments keep unemployment near 5 percent.
Australia’s dollar bought 99.78 U.S. cents from 99.59 cents on Jan. 7, when it declined to 99.08 cents, the lowest since Dec. 20. New Zealand’s dollar was at 76.23 cents from 75.98.
South Korea’s Won
South Korea’s won strengthened after the Bank of Korea said today producer prices rose 5.3 percent last month from a year earlier, the biggest gain since December 2008, spurring speculation policy makers will raise interest rates this week.
Four out of nine economists surveyed by Bloomberg News expect a 0.25 percentage point increase to 2.75 percent at the central bank’s monetary policy meeting on Jan. 13. The rest expect no change.
“There are market forces betting on a stronger won as we see inflation rise,” said Kim Jin Ju, a currency trader at Korea Exchange Bank in Seoul.
The won advanced 0.3 percent to 1,118.60 per dollar according to data compiled by Bloomberg. It reached 1,115.95 earlier, the strongest level since Nov. 12.
To contact the reporters on this story: Ron Harui in Singapore at rharui@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
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