BLBG:Euro Falls on Concern Leaders Failing to Stop Contagion; Dollar, Yen Gain
The euro fell toward an eight-week low against the dollar on concern European measures to halt the debt crisis will fail to halt contagion and as Standard & Poor’s cut the credit ratings of some of the world’s largest banks.
The 17-nation currency dropped for a second day versus the yen after euro-area finance ministers approved enhancements to their bailout fund yesterday while backing off from setting a target for its firepower and seeking a greater role for the International Monetary Fund. The yen and the dollar strengthened against most of their major counterparts as stock declines spurred demand for safer assets.
“Euro is quite weak again today,” said Jeremy Hale, head of macro strategy at Citigroup Inc. in London. “I’m not of the view that any of the decisions being taken by the finance ministers are changing anything. We’re still waiting for some definitive action. Markets are still very nervous about a breakup of the euro-region.”
The euro fell 0.3 percent to $1.3284 at 8:57 a.m. London time after dropping to $1.3212 on Nov. 25, the weakest level since Oct. 4. The shared currency dropped 0.2 percent to 103.57 yen. The yen was little changed at 78.01 per dollar.
Euro-area finance ministers meeting in Brussels conceded the effort to expand their bailout fund missed the target. The finance chiefs agreed to work on boosting the resources of the IMF so it can “cooperate more closely” with the European Financial Stability Facility, Luxembourg’s Jean-Claude Juncker told reporters after leading the meeting.
Monthly Decline
The euro has declined 4.2 percent versus the dollar and 4.4 percent against the yen this month as speculation the sovereign debt crisis is spreading to the larger nations damped demand for the region’s assets.
S&P lowered the ratings of Goldman Sachs Group Inc. and Bank of America Corp. to A- from A, as part of criteria changes started three years ago. The company also reduced the rankings of UBS AG, Morgan Stanley, Citigroup, Bank of America’s Merrill Lynch unit and JPMorgan Chase & Co.
The dollar gained 0.3 percent today, according to Bloomberg Correlation-Weighted Indexes, making it the biggest gainer among the 10 developed-nation currencies. The yen advanced 0.2 percent, and the euro weakened 0.1 percent.
The Stoxx Europe 600 Index of shares fell 0.7 percent, and futures on the Standard & Poor’s 500 Index expiring in December dropped 0.6 percent.
“Some risk has been taken off because of the downgrade of the banks,” said Chris Walker, a foreign-exchange strategist at UBS AG in London. “Fundamentally, the euro should be lower and while there are still risks in the euro-region, people will look to sell euro-denominated assets.”
To contact the reporter on this story: Emma Charlton in London at echarlton1@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
