By Candice Zachariahs June 7 (Bloomberg) -- The euro plunged to its weakest level since November 2001 versus the yen and touched a four- year low against the dollar on concern Europe’s sovereign debt crisis will spread, denting global growth. The yen climbed versus all of its most-traded counterparts as Asian equities extended a global slump after a report June 4 showed that employers in the U.S. hired fewer workers in May than economists had forecast. The Malaysian ringgit was poised for its biggest drop in 12 years. Europe’s shared currency fell for a third day after officials in Hungary’s government last week compared the country to Greece while claiming the previous administration lied about public finances. “The euro is the clearest sell out of all this,” said Greg Gibbs, a foreign-exchange strategist at Royal Bank of Scotland Group Plc in Sydney. “The market is groaning under the weight of excessive debt levels and there’s a lot of concern over the state of European banks. Hungary is just another straw being piled onto the camel’s back.” The euro slid 1.1 percent to 108.77 yen at 6:37 a.m. in London from 109.98 in New York on June 4, when it declined 2.5 percent. It touched 108.08 yen, the weakest since November 2001. The 16-nation currency fell to $1.1922 from $1.1967 in New York and touched $1.1877, the lowest level since March 2006. The yen strengthened for a second day to 91.26 per dollar from 91.90. The ringgit weakened 1.8 percent to 3.3335 per dollar and has fallen 2.2 percent this month. The MSCI Asia Pacific Index dropped 3.2 percent, set for the biggest slide since March 2009. Europe’s banks may have to write off 195 billion euros ($232 billion) of bad debts by 2011, the European Central Bank said on May 31. Credit Default Swaps The euro slid 2.5 percent last week versus the greenback as credit-default swaps on France, Austria, Belgium and Germany rose, sending the Markit iTraxx SovX Western Europe Index of contracts on 15 governments to a record. The cost of insuring against losses on Hungarian sovereign debt surged after comments from government officials sparked concern Europe’s sovereign debt crisis may be spreading to eastern Europe. “Any comparison with countries that have much higher credit default swap ratings than Hungary is unfortunate,” State Secretary Mihaly Varga told reporters in Budapest June 5. German factory orders probably fell 0.4 in April, according to a Bloomberg News survey of economists before the Economy Ministry in Berlin reports the data today. Lower Growth “Markets have to price for lower growth than what they had previously priced and that’s got to work its way through,” said Richard Grace, chief currency strategist in Sydney at Commonwealth Bank of Australia. “The yen will probably maintain a bias toward strength.” A government report June 4 showed U.S. payrolls rose by 431,000 last month, compared to the median forecast for a 536,000 gain in a Bloomberg News survey. U.S. retail sales growth slowed in May to 0.2 percent after gaining 0.4 percent in April, according to economists in a separate Bloomberg survey. The Commerce Department reports the data on June 11. Japan’s currency gained for a second day versus the Australian dollar as investors sold higher-yielding assets on concern over Europe and speculation China’s efforts to curb asset prices will weigh on growth. China is Australia’s largest trading partner. China’s Prices Consumer prices in China probably climbed in May at the fastest pace since October 2008, a report June 11 is forecast to show according to a Bloomberg survey. “In addition to the existing debate about whether China will successfully cool its overheating economy without a slump in growth, we now have the uncertainty about the fallout for the rest of the world from Europe’s debt problems,” said John Kyriakopoulos, head of currency strategy at National Australia Bank Ltd. in Sydney. “The outlook for the Australian dollar has become a lot more uncertain.” Australia’s currency slid 1.1 percent to 81.44 U.S. cents after reaching 80.97 cents, the lowest since May 25, from 82.34 cents on June 4 in New York. It fell 1.8 percent to 74.30 yen. Gains in Japan’s currency will likely be limited on speculation Prime Minister Naoto Kan may favor a weaker currency, said Commonwealth Bank’s Grace. Kan said on Jan. 7, his first day as finance minister, that he wanted the yen to fall “a bit more” and pledged to monitor its level. Kan, who is succeeding Yukio Hatoyama, takes the reins just weeks before the government is due to say how it intends to reduce public debt and release a strategy to sustain a nominal 3 percent growth rate over the next decade, a pace unseen since 1991. “There’s probably a limit to how much the yen will strengthen given that it has its own sovereign issues to deal with and the government is likely to be endorsing a weaker yen in order to meet its growth targets,” Grace said. To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

Source