BLBG:Euro Trades Near 11-Month Low Before Spain Debt Sale; Aussie Dollar Gains
The euro traded 0.5 percent from an 11-month low before Spain sells government bills and the release of a German report forecast to show deteriorating business confidence in Europe’s largest economy.
The 17-nation euro maintained yesterday’s drop versus the dollar amid signs Europe may have difficulty attracting outside funds to address its debt crisis. Australia’s dollar rose after the Reserve Bank said in minutes of its Dec. 6 meeting that investment in the domestic economy and “solid growth” among trading partners had tempered the need for lower rates. Sweden’s krona strengthened against the dollar before an interest-rate decision from the nation’s central bank.
“The pressure is still on the downside for the euro,” said Chris Walker, a foreign-exchange strategist at UBS AG in London. “We’re predicting a recession next year. The extent of negatives is pretty extreme.”
The euro traded at $1.3012 at 8:06 a.m. London time from $1.2998 in New York yesterday, after falling as low as $1.2946 on Dec. 14, the least since Jan. 11. Europe’s common currency fetched 101.44 yen from 101.45 yesterday. The dollar bought 77.97 yen from 78.05.
Spain is due to auction as much as 4.5 billion euros ($5.85 billion) of three- and six-month securities today. Fitch Ratings lowered its outlook on France to “negative” on Dec. 16 and also put Spain and Italy on review for a downgrade.
Euro-region governments have to repay more than 1.1 trillion euros of long- and short-term debt in 2012, according to Bloomberg data. Italy and Spain have about 146 billion euros of bonds and bills maturing in the first quarter, the data show.
IMF Funds
European finance ministers yesterday said they will boost their anti-crisis efforts by pledging 150 billion euros to the International Monetary Fund. Four countries not using the single currency also agreed to add to the IMF war chest while Britain refused to commit funds, a sign of the difficulty of attracting outside cash to ease the euro area’s debt burdens.
The 17-nation euro depreciated 2.7 percent versus the dollar this year and 6.5 percent against the yen. The dollar has dropped 3.9 percent versus the Japanese currency.
German business confidence probably fell to the lowest in 21 months in December. The Munich-based Ifo institute’s business climate index, based on a survey of 7,000 executives, fell to 106 from 106.6 in November, according to the median estimate of economists in a Bloomberg News survey before the data is released today.
ECB Lending
Declines in the euro were limited before the European Central Bank starts its longer-term refinancing operation today in which banks can borrow unlimited funds in return for eligible collateral, including euro-region government bonds. It’s up to the banks to decide what to do with the money, ECB President Mario Draghi told the Financial Times in an interview conducted on Dec. 14.
The euro may find “some potential short-lived support” as attention shifts to the take-up of the ECB’s three-year loan program, Ray Attrill, a senior currency strategist at BNP Paribas SA in New York, wrote in a note to clients. “The interest comes on the back of speculation that the LTRO might provide a new source of demand by banks for euro-zone sovereign debt.”
The Australian dollar gained against most of its major peers as the central bank released minutes of its last meeting when it cut rates for a second-straight month. Reserve Bank of Australia policy makers saw a continued expansion in the domestic economy even as Europe’s debt crisis weighs on global growth.
RBA Minutes
“It’s the offshore economy rather than the local economy which was the reason why the RBA cut rates,” said Richard Grace, chief currency strategist in Sydney at Commonwealth Bank of Australia. The minutes “suggest that they’re not going to be in a hurry to cut rates in the near future,” which is supporting the currency, he said.
The Australian dollar rose 0.6 percent to 99.54 U.S. cents. The New Zealand currency also climbed 0.6 percent, to 76.93 U.S. cents.
Sweden’s krona strengthened 0.2 percent to 6.90090 per dollar before the Riksbank’s interest-rate decision. In a Bloomberg survey, 11 economists said policy makers will keep the rate unchanged at 2 percent, 11 predicted a cut to 1.75 percent and two said the central bank will reduce rates to 1.50 percent.
To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Paul Dobson in London at pdobson2@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
