BLBG:Euro Declines Toward Eight-Week Low on Contagion Concern; Pound Weakens
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 extended a monthly decline versus the greenback after euro-area finance ministers conceded efforts to expand their bailout fund missed the target and said they would seek a greater role for the International Monetary Fund. The dollar rose against most of its major counterparts as stock declines spurred demand for safer assets. The pound fell after a report showed consumer confidence stalled this month.
“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 0.2 percent to $1.3297 at 10:20 a.m. London time after dropping to $1.3212 on Nov. 25, the weakest level since Oct. 4. The shared currency was little changed at 103.75 yen. The dollar gained 0.1 percent to 78.03 yen.
Euro-area finance ministers meeting in Brussels yesterday 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 a series of stop-gap accords failed to protect Italy and Spain from surging bond yields, Europe is under growing pressure from U.S. leaders and international financial markets to find ways to boost the EFSF’s effectiveness.
Monthly Decline
The euro has declined 4.1 percent versus the dollar and 4.2 percent against the yen this month as speculation the sovereign debt crisis will infect 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 rose 0.3 percent today, according to Bloomberg Correlation-Weighted Indexes, making it the biggest gainer among the 10 developed-nation currencies. The yen advanced 0.1 percent, and the euro weakened 0.1 percent.
The Stoxx Europe 600 Index of shares fell 0.3 percent, and futures on the Standard & Poor’s 500 Index expiring in December dropped 0.3 percent.
‘Look to Sell’
“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.”
The pound fell for the first time in three days against the dollar after research group GfK NOP said an index of U.K. consumer sentiment rose 1 point from October to minus 31, barely recovering from the weakest reading since February 2009.
Bank of England governor Mervyn King said this week the U.K. is being “increasingly threatened” by the euro crisis, while Chancellor of the Exchequer George Osborne said yesterday growth will be slower than forecast next year. The weaker outlook means Osborne plans additional restraint on public- sector pay and will extend his austerity program by two years.
Sterling dropped 0.3 percent to $1.5553, and depreciated 0.1 percent to 85.47 pence per euro.
The U.K. currency has dropped 3.3 percent against the dollar this month, and declined 3.5 percent versus the yen.
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
