BLBG:Euro Weakens to Two-Month Low Versus Yen Before Bailout Fund Sells Bills
The euro declined to a two-month low against the yen as the region’s bailout fund prepared to auction short-maturity debt for the first time amid concern European nations will have their credit ratings cut.
The 17-nation currency dropped to the weakest level since February against the British pound as Italian and Spanish government bonds declined for a second day. The dollar fell against the yen before the Federal Reserve holds a policy meeting today on speculation officials will maintain their pledge to keep borrowing costs near a record low.
“That ratings agencies are still scrutinizing the sovereigns and the banks is going to remain a negative for the euro,” said Ian Stannard, head of European foreign-exchange strategy at Morgan Stanley in London. “We’re going to see the euro remaining under pressure.”
The euro fell 0.1 percent to 102.69 yen at 10:26 a.m. in London after declining to 102.43 yen, the weakest since Oct. 10. The single currency was little changed at $1.3913, and traded at 84.63 U.K. pence after sliding to 84.42 pence, the least since Feb. 23. The dollar dropped 0.2 percent to 77.81 yen.
The European Financial Stability Facility, the EU’s bailout fund, will auction as much as 2 billion euros of 91-day bills today, after Spain sold 4.94 billion euros of 12-month and 18- month bills, exceeding the maximum target of 4.25 billion euros.
The EFSF auction will be its first fund-raising since European leaders agree on a closer fiscal accord and additional resources to combat the region’s debt crisis at a summit in Brussels last week.
Fitch, Moody’s
Fitch Ratings and Moody’s Investors Service said yesterday the European Union summit offered little help in ending the two- year old debt crisis.
The dollar dropped the most against the Australian currency and yen among its 16 major counterparts.
Fed policy makers will keep their target rate in a range of zero to 0.25 percent at today’s gathering, according to a Bloomberg News survey.
“I don’t think there’s any question they’ll even hint about withdrawing stimulus” at the Fed meeting, said Neil Mellor, a strategist at Bank of New York Mellon Corp. in London. “It will underpin the elements in the equation that have kept the dollar weak. Looking forward to 2012, you cannot ignore the market’s desire to sell dollars.”
The Dollar Index (DXY), which IntercontinentalExchange Inc. uses to track the U.S. currency against those of six major trading partners, declined 0.1 percent to 79.519.
To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
