BLBG:Euro Falls as Moody’s Rating Warning Shows Debt-Crisis Concern; Yen Gains
The euro fell toward the lowest this month versus the dollar after Moody’s Investors Service said it will review ratings for all European Union countries, citing a failure to produce “decisive” measures to end the debt crisis.
The yen strengthened versus all of its major counterparts as European stocks declined and German bunds rose before Italy and France sell government debt today. China’s yuan gained after the central bank set the strongest reference rate in a month and signaled the currency will be allowed to trade more freely.
“Moody’s captures the mood but the market is disappointed that nothing more substantial was agreed” at last week’s EU summit, said Kit Juckes, head of foreign-exchange research at Societe Generale SA in London. “Very few people will arrive at work this week full of optimism that the crisis is anywhere near ending. There are no convincing reasons for anyone to want to own the euro today.”
The 17-nation euro slid 0.6 percent to $1.3313 at 8:31 a.m. London time after falling to $1.3282 on Dec. 9, the weakest level since Nov. 30. The euro declined 0.5 percent to 103.37 yen. The dollar was little changed at 77.65 yen.
The euro may depreciate toward $1.3145, which would be the lowest level since January, Juckes said.
EU leaders committed “to establishing a new fiscal rule” which curbs a nation’s annual structural deficit below 0.5 percent of nominal gross domestic product, according to a statement from the European Council released on Dec. 9 after a meeting of leaders in Brussels. The agreement offered few new measures and doesn’t diminish the risk of credit-ranking revisions, Moody’s said in its Weekly Credit Outlook.
‘Immediate Issue’
Bundesbank President Jens Weidmann told the Frankfurter Allgemeine Sonntagszeitung that while a European agreement to limit budget deficits represents “progress,” the onus is on governments rather than the Frankfurt-based European Central Bank to resolve the crisis with financial backing.
“While the fiscal compact is a step in the right direction, it’s not aimed at addressing the immediate issue of the sovereign-debt crisis, which is threatening to plunge the euro zone into a deep recession,” John Kyriakopoulos, head of currency strategy at National Australia Bank Ltd. in Sydney, wrote in a research note today.
Italy will sell 7 billion euros of 365-day bills, while France is due to auction 6.5 billion euros of short-term debt.
The euro has fallen 1.2 percent in the past month, the biggest drop in Bloomberg Correlation-Weighted Indexes tracking 10 developed-nation currencies. The dollar gained 2.4 percent, the best performance, and the yen has advanced 1.7 percent.
The Stoxx Europe 600 Index slid fell 0.5 percent and 10- year German bond yields fell three basis points to 2.12 percent.
Yuan Gains
The yuan rose after the Financial News reported Xuan Changneng, head of the People’s Bank of China’s financial stability bureau, as saying policy makers will maintain flexibility while pushing forward with interest-rate and exchange-rate reform. The central bank raised its daily fixing 0.09 percent to the highest level since Nov. 9.
“The PBOC’s comment quelled investors’ depreciation expectations after the weaker export growth,” said Kenix Lai, a Hong Kong-based currency analyst at Bank of East Asia Ltd. “The stronger fixing also shows that China will still allow gains in the currency, even though the pace may slow.”
The yuan gained 0.06 percent to 6.3610 per dollar, after falling 0.08 percent last week.
To contact the reporters on this story: Paul Dobson in London at pdobson2@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
