SF: Euro Weakens as Finance Chiefs Fail to Offer Plan; Dollar Gains
Sept. 19 (Bloomberg) -- The euro weakened to almost a seven-month low against the dollar after European officials failed to offer a plan to halt the region's debt crisis, as Greece struggles to avoid default.
The dollar rose against all its major counterparts except the yen as Treasury two-year yields fell to a record before the Federal Reserve begins its two-day meeting tomorrow. The 17- nation currency approached a 10-year low versus the yen before European Union and International Monetary Fund officials judge whether the Greek government is eligible for its next aid payment. South Korea's won slid to a six-month low as concern Greece will default damped demand for emerging-market assets.
"The comments over the weekend weren't particularly supportive for the euro," said Vassili Serebriakov, a currency strategist in New York at Wells Fargo & Co. "There is certainly lack of progress, which is disappointing."
The euro depreciated 1 percent to $1.3653 at 8:48 a.m. in New York, erasing last week's 1 percent gain. It touched $1.3495 on Sept. 12, the least since February. The currency weakened 1.2 percent to 104.73 yen, after sliding to 103.90 on Sept. 12, the lowest level since June 2001. The dollar was little changed at 76.72 yen.
The Dollar Index, which tracks the U.S. currency against those of six major trading partners including the euro, yen and pound, advanced 0.8 percent to 77.202.
Greek Review
After a two-day meeting of EU finance ministers and central bankers that ended Sept. 17, Sweden's Anders Borg said Greece hasn't done enough to meet its budget targets. The country is struggling to convince critics that it will be able to win a sixth tranche of loans to prevent default.
German Finance Minister Wolfgang Schaeuble and Bundesbank President Jens Weidmann rejected using the European Central Bank to boost the euro-area rescue fund's firepower. "We don't think that real economic and social problems can be solved by means of monetary policy," Schaeuble told reporters Sept. 17. "That has never been the European model and it won't be."
Greek Finance Minister Evangelos Venizelos will hold a conference call with the heads of the EU and IMF mission to Athens at about 7 p.m. local time, the state-run NET TV reported, without saying how it got the information.
The euro's seven-day relative strength index versus the dollar fell below 30 for the first time in four days. A reading below 30 indicates an asset may have fallen too quickly and may be due to rebound.
Futures Traders
Futures traders increased bets the euro will weaken against the dollar to the highest since July 2010, figures from the Washington-based Commodity Futures Trading Commission show.
The Fed's Open Market Committee may decide to replace some of the short-term Treasuries in the central bank's $1.65 trillion portfolio with longer-maturity debt in a bid to lower borrowing costs, according to economists at Wells Fargo & Co., Barclays Capital Inc. and Goldman Sachs Group Inc. Some analysts dub the maneuver "Operation Twist" because it would bend long- term yields lower.
"The FOMC are backing up everything they've said on a month-by-month basis," said Kurt Magnus, executive director of currency sales in Sydney at Nomura Holdings Inc., Japan's biggest brokerage. "They're not going to let the market down. The dollar will be outperforming the euro while Europe's still in turmoil."
Treasury Record
The dollar also rallied as investors bought the nation's debt as a refuge amid stock declines. The Treasury two-year yield fell to a record of 0.1512 percent before trading little changed at 0.16 percent. Futures on the Standard & Poor's 500 Index declined 1.5 percent.
Japan may outline measures to counter the strong yen as early as tomorrow, Economic Policy Minister Motohisa Furukawa signaled in remarks yesterday, Kyodo News reported. The package will be aimed at reducing the impact of the currency's gains on local businesses, according to the report.
The yen has risen 7.2 percent in the past three months, the best performer among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar, the third best, has advanced 2.3 percent.
Korea's won fell even as the finance ministry said authorities will take steps to stabilize the currency if "herd behavior" is apparent. It should reflect economic fundamentals and market supply and demand, it said.
The currency slid 2.3 percent to close at 1,137.07 per dollar, adding to a 3.1 percent decline last week. It earlier fell to 1,141.50, the weakest level since March.
Norway's krone was the second-worst performer against the dollar today as crude oil fell as much as 1.8 percent to $86.35 a barrel in New York, the lowest in a week.
The krone dropped 1.9 percent to 5.6781 per dollar from 5.5738. It declined 0.7 percent to 7.7452 versus the euro, from 7.6894.
--With assistance from Kristine Aquino in Singapore and Candice Zachariahs in Sydney. Editors: Paul Cox
