BLBG:Euro Decliens to Two-Week Low Versus Yen as Spain’s Credit Rating Reviewed
The euro dropped to a two-week low against the yen and fell against the dollar as Moody’s Investors Service said it may cut Spain’s credit ranking and the nation’s prime minister called an early election.
The yen, Swiss franc and dollar advanced against their major counterparts as the U.S. budget impasse and European sovereign-debt concern encouraged demand for a refuge. The pound fell against the dollar as a gauge of U.K. consumer sentiment decreased more than economists forecast.
“General fears are still high regarding the euro zone,” said Ulrich Leuchtmann, head of currency strategy at Frankfurt- based Commerzbank AG. “There’s every reason to trade the euro weaker.”
The euro slid 0.7 percent to 110.60 yen at 8:14 a.m. in New York, from 111.34 yesterday, after touching 110.51, the lowest level since July 13. The euro decreased 0.5 percent to $1.4260, from $1.4334, extending its drop this month to 1.7 percent. The dollar slid 0.2 percent to 77.55 yen, from 77.67, after touching 77.46, the lowest level since falling to a post-World War II record of 76.25 on March 17.
New Zealand’s dollar fell against all of its major counterparts on reduced demand for higher-yielding assets, dropping 0.7 percent to 86.49 U.S. cents after touching a record high 87.66 cents on July 27. Australia’s dollar weakened 0.6 percent to $1.0935.
Spain Vote
Spain’s Prime Minister Jose Luis Rodriguez Zapatero, whose ruling Socialist Party has been losing support as he embarked on austerity measures, said at a news conference in Madrid today that elections will be held Nov. 20 instead of March to “project political and economic certainty.”
Spain’s Aa2 ratings were placed on review for possible downgrade by Moody’s. The country’s Prime-1 short-term ratings are unaffected by today’s action, Moody’s said.
The euro has weakened 2.8 percent in the past month in the worst performance among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Currency Indexes.
“It’s still fiscal, sovereign and debt issues,” said Emmanuel Ng, a currency strategist at Oversea-Chinese Banking Corp. in Singapore, who said he’s “bearish” on the euro.
The Swiss franc gained 0.6 percent to 1.1409 versus the euro and advanced 0.2 percent to 80 centimes versus the dollar today after rallying to a record 79.90 yesterday. The franc was headed for a 4.2 percent gain versus the dollar in July in what would be the longest winning streak since June 1994.
U.S. Vote Canceled
In the U.S., House Speaker John Boehner canceled a vote on increasing the U.S. debt limit after failing in one-on-one appeals to members. The administration of President Barack Obama will brief the public no earlier than the close of markets on priorities for paying the nation’s obligations if the $14.3 trillion debt ceiling isn’t raised, a Democratic Party official said.
Treasury Secretary Timothy F. Geithner has said options to prevent a default will run out on Aug. 2 if the limit isn’t increased. An administration official said yesterday the Treasury will give precedence to making interest payments on government bonds.
The dollar headed for a 3.7 percent monthly loss versus the yen before a government report today that economists said will show growth slowed last quarter.
Slower Economic Growth
Gross domestic product expanded 1.8 percent in the three months ended June 30, compared with 1.9 percent in the previous quarter, according to the median forecast of 85 economists in a Bloomberg News survey.
The pound decreased 0.5 percent to $1.6301 and slid 0.6 percent to 126.43 yen. Sterling was little changed at 87.57 pence per euro after reaching 87.36 pence yesterday, the strongest level since July 18.
An index of U.K. sentiment slipped five points in July to minus 30, GfK NOP Ltd., a London-based research group, said today. All five measures of the index fell, with a gauge of expectations for the economy in the coming year showing the biggest decline. The average cost of a house decreased 0.4 percent from last July, Swindon, England-based Nationwide Building Society said today.
To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
