BLBG: Euro Trades Near Two-Week Low as Region’s Jobless Rate Rises
The euro traded near a two-week low against the dollar and pound as a report showed Europe’s jobless rate climbed to the highest level in almost three years, adding to evidence the region’s recession is worsening.
The common currency also weakened after a report indicated German retail sales unexpectedly dropped in February and Europe’s manufacturing contracted last month more than previously estimated. The yen pared gains versus the euro and dollar as a surprise February advance in the U.S. housing market reduced demand for the Japanese currency’s safety.
“We’ll continue to see the euro’s outlook being predicated toward lower levels,” said Jeremy Stretch, a senior currency strategist in London at Rabobank International. “Ongoing signs of the euro area’s fragility will keep the market pinned down.”
The 16-nation euro traded at $1.3230 at 10:58 a.m. in New York, compared with $1.3250 yesterday. It touched $1.3114 on March 30, the lowest level since March 18. The euro was at 130.98 yen, compared with 131.13. Against the pound, the euro depreciated 0.5 percent to 92.09 pence after touching 91.55, the lowest level since March 16. Japan’s yen was at 98.85 per dollar, compared with 98.96. It earlier declined to 99.47, the weakest level since March 5.
The euro region’s jobless rate increased in February to 8.5 percent, the highest level since May 2006, the European Union’s statistics office said in Luxembourg today. The median forecast of 23 economists surveyed by Bloomberg was 8.3 percent.
An index of European manufacturing based on a survey of purchasing managers by Markit Economics was 33.9 in March, below the initial estimate of 34. A reading below 50 indicates contraction.
German Retail Drop
German retail sales, adjusted for inflation and seasonal swings, decreased 0.2 percent in February, the Federal Statistics Office in Wiesbaden said. The median forecast of economists in a separate survey was an increase of 0.3 percent.
Investors should use any gains in the euro as an opportunity to sell the currency as the region’s economic slowdown deepens, according to Westpac Banking Corp.
“As the numbers show increasing slack in European economies and officials become more vocal, we like to sell any euro rallies,” Lauren Rosborough, a currency strategist in London at Westpac, wrote in a report today.
The euro may decline toward $1.3100 and $1.3120, before testing the next “level of support” at a range of $1.3070 to $1.3080, Rosborough wrote. Support is a level where orders to buy or sell an asset are clustered.
ECB’s Rate
The European Central Bank will lower the main refinancing rate by a half-percentage point to 1 percent tomorrow, according to the median forecast of 55 economists surveyed by Bloomberg. ECB council member Axel Weber said in March that the central bank shouldn’t cut borrowing costs below that level.
Contracts to buy previously owned homes in the U.S. increased 2.1 percent in February after a 7.7 percent drop in the previous month, the National Association of Realtors reported today. The median forecast of 37 economists surveyed by Bloomberg was for no change.
The yen fell earlier to the lowest level in almost four weeks against the dollar after the Bank of Japan’s Tankan survey of sentiment among large manufacturers slumped to minus 58 in March from minus 24 in December. The median forecast of economists surveyed by Bloomberg was a reading of minus 55.
‘Taking the Hit’
“Japan seems to be taking the hit in terms of their economy a lot worse than other countries,” said Adam Carr, a senior economist in Sydney at ICAP Australia Ltd., a unit of the world’s largest interdealer broker. The Tankan survey “absolutely highlights the reason why we should be getting out of the yen.”
The yen tumbled 8.4 percent against the dollar in the first quarter, the worst performance since the last three months of 2001, and weakened 3.4 percent versus the euro, the first quarterly drop since June.
The Dollar Index, which the ICE uses to track the greenback against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, rose 0.2 percent today after a fourth consecutive quarterly gain, the longest stretch of advances since 2005.
