By Monami Yui and Masaki Kondo -
Oct 10, 2012 12:35 PM GMT+0800
The euro fell for a third day amid
speculation data will add to evidence that Europe’s failure to
resolve its debt crisis is weighing on the region’s economy.
The 17-nation euro slid to its lowest level in one week against the yen as economists said reports today may show French and Italian industrial production decreased in August. Japan’s currency gained against most major peers as declines in stocks worldwide boosted demand for safer assets. Losses in the euro were limited before Spain’s Prime Minister Mariano Rajoy meets French President Francois Hollande today in Paris as investors weigh whether the Iberian nation will ask for a bailout.
“The euro is the least desirable currency,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp. (8711), a currency-margin company. “Europe’s economy remains in a worse state than the U.S. and Japan.”
The euro weakened 0.2 percent to $1.2859 as of 1:02 p.m. in Tokyo from the close yesterday in New York, after earlier touching $1.2835, the lowest since Oct. 1. It declined to 100.44 yen, also the least since Oct. 1, before trading at 100.64, 0.2 percent lower than yesterday’s close. The yen was little changed at 78.27 per dollar.
The euro may fall below $1.20 by March, Ueda forecast.
The MSCI Asia Pacific Index of shares headed for a third day of declines, losing 0.8 percent. The Standard & Poor’s 500 Index dropped 1 percent yesterday.
Implied volatility among major currencies, which signals the expected pace of price swings, was 7.7 percent today, according to a JPMorgan Chase & Co. gauge of Group-of-Seven currencies. That’s up from an almost five-year low of 7.5 percent reached on Oct. 5. Increased volatility makes investments in currencies with higher key lending rates less attractive because the risk in such trades is that market moves will erase profit.
Separate data may show Italian output fell 0.5 percent during the same month, another poll showed. France is the euro area’s second-largest economy and Italy is the third-biggest.
Spain’s Rajoy last week pushed back expectations of a bailout, telling reporters no request was imminent. His deputy, Soraya Saenz de Santamaria, said the government needs to ensure a request for help from the European Stability Mechanism would be granted before it can call for aid. A bid to the ESM is needed to trigger support from the European Central Bank.
“We expect Spain to ask for aid before the EU summit,” said Yuki Sakasai, a currency strategist at Barclays Plc in New York. “The risk scenario is that Spain’s hesitance may spur a selling-off in its bonds and the euro.”
In Greece, where the European debt crisis began, the government has been in talks with the so-called troika of the European Commission, ECB and International Monetary Fund for more than two months over a program of spending cuts, which is key to unlocking the next 31 billion euros ($39.9 billion) from two rescue packages totaling 240 billion euros. The talks were set to resume this week.
German Chancellor Angela Merkel maintained pressure on Greece to meet austerity pledges, while proclaiming her desire to keep the country in the euro. After meeting Greek Prime Minister Antonis Samaras in Athens yesterday, Merkel told reporters that while “a lot has been done, much remains to be done.”
The euro depreciated 5.7 percent over the past year, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 0.4 percent and the yen weakened 3.5 percent..
To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net.
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
The 17-nation euro slid to its lowest level in one week against the yen as economists said reports today may show French and Italian industrial production decreased in August. Japan’s currency gained against most major peers as declines in stocks worldwide boosted demand for safer assets. Losses in the euro were limited before Spain’s Prime Minister Mariano Rajoy meets French President Francois Hollande today in Paris as investors weigh whether the Iberian nation will ask for a bailout.
“The euro is the least desirable currency,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp. (8711), a currency-margin company. “Europe’s economy remains in a worse state than the U.S. and Japan.”
The euro weakened 0.2 percent to $1.2859 as of 1:02 p.m. in Tokyo from the close yesterday in New York, after earlier touching $1.2835, the lowest since Oct. 1. It declined to 100.44 yen, also the least since Oct. 1, before trading at 100.64, 0.2 percent lower than yesterday’s close. The yen was little changed at 78.27 per dollar.
The euro may fall below $1.20 by March, Ueda forecast.
The MSCI Asia Pacific Index of shares headed for a third day of declines, losing 0.8 percent. The Standard & Poor’s 500 Index dropped 1 percent yesterday.
Implied volatility among major currencies, which signals the expected pace of price swings, was 7.7 percent today, according to a JPMorgan Chase & Co. gauge of Group-of-Seven currencies. That’s up from an almost five-year low of 7.5 percent reached on Oct. 5. Increased volatility makes investments in currencies with higher key lending rates less attractive because the risk in such trades is that market moves will erase profit.
Industrial Production
French industrial production probably declined 0.3 percent in August from July, when it gained 0.2 percent, according to the median estimate of economists in a Bloomberg News survey before the statistics office releases the report today.Separate data may show Italian output fell 0.5 percent during the same month, another poll showed. France is the euro area’s second-largest economy and Italy is the third-biggest.
Spain’s Rajoy last week pushed back expectations of a bailout, telling reporters no request was imminent. His deputy, Soraya Saenz de Santamaria, said the government needs to ensure a request for help from the European Stability Mechanism would be granted before it can call for aid. A bid to the ESM is needed to trigger support from the European Central Bank.
Bailout Prospects
Spain’s economy minister Luis de Guindos said yesterday the nation will decide on the “sensitive” issue of a full bailout, taking into account the impact for the whole euro area. European Union leaders are scheduled to gather for a summit in Brussels on Oct. 18-19.“We expect Spain to ask for aid before the EU summit,” said Yuki Sakasai, a currency strategist at Barclays Plc in New York. “The risk scenario is that Spain’s hesitance may spur a selling-off in its bonds and the euro.”
In Greece, where the European debt crisis began, the government has been in talks with the so-called troika of the European Commission, ECB and International Monetary Fund for more than two months over a program of spending cuts, which is key to unlocking the next 31 billion euros ($39.9 billion) from two rescue packages totaling 240 billion euros. The talks were set to resume this week.
German Chancellor Angela Merkel maintained pressure on Greece to meet austerity pledges, while proclaiming her desire to keep the country in the euro. After meeting Greek Prime Minister Antonis Samaras in Athens yesterday, Merkel told reporters that while “a lot has been done, much remains to be done.”
The euro depreciated 5.7 percent over the past year, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 0.4 percent and the yen weakened 3.5 percent..
To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net.
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
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