BLBG:Dollar Near 11-Month High Against Euro Before Draghi Speaks, Bill Auctions
The dollar traded 0.8 percent from an 11-month high versus the euro before European Central Bank President Mario Draghi speaks today amid concern policy makers are struggling to contain the euro region’s debt crisis.
Europe’s common currency held yesterday’s decline as France and Italy prepare to sell debt next week amid speculation Standard & Poor’s will cut the credit ratings of European countries. Australia’s dollar weakened against most its major counterparts as Asian stocks retreated, sapping demand for higher-yielding currencies.
“The dollar is being bought as a refuge,” said Kengo Suzuki, manager of the foreign-bond department in Tokyo at Mizuho Securities Co., a unit of Japan’s third-biggest listed bank by market value. “We’re likely to see Europe’s debt problems get more serious in the first half of next year.”
The U.S. currency traded at $1.3044 per euro as of 2:01 p.m. in Tokyo from $1.3047 in New York yesterday. It strengthened to $1.2946 per euro on Dec. 14, the highest since Jan. 11. The dollar was little changed at 78.05 yen. The 17- nation euro bought 101.81 yen from 101.86 yesterday.
Draghi will hold a media briefing in Frankfurt today after a meeting of the European Systemic Risk Board. The ECB President said on Dec. 19 that lenders in the euro region will experience “very significant” funding constraints next year and that there are “substantial downside risks” to the economy.
Downgrade Risk
France will auction bills on Dec. 27, while Italy will offer debt maturing in 2014, 2018, 2021 and 2022 on Dec. 29. S&P said this month it may cut the credit grades of 15 euro nations, including Germany and France, the region’s biggest economies.
“The S&P downgrade of euro-zone sovereigns is hanging over the market but there is no definite timing,” Steven Englander, head of Group of 10 currency strategy at Citigroup Inc. in New York, wrote in a note dated today. “S&P probably wants to manage the announcement so as to have the least market impact.”
Italy’s Senate is set to give final approval today to Prime Minister Mario Monti’s 30 billion-euro ($39 billion) emergency budget plan, including a pension overhaul and a levy on primary residences. The ballot in the upper house will take place at about 2:15 p.m. in Rome following an address to lawmakers by Monti, Senate Speaker Renato Schifani said last night.
An index of household sentiment in the euro area fell to minus 21.2 in December, the lowest since August 2009, data from the European Commission showed yesterday.
‘Bearish’ on Euro
The euro has depreciated 2.5 percent against the dollar this year, poised for a second-straight annual drop. The yen has gained 3.9 percent versus the greenback and 6.6 percent against the shared European currency.
“I’m bearish on the euro,” said Toshiya Yamauchi, a senior currency analyst in Tokyo at Ueda Harlow Ltd., which provides foreign-exchange margin trading services. “It will take more time until we see a resolution to Europe’s debt crisis.”
The Australian and New Zealand dollars dropped as Asian stocks snapped a two-day rally amid concern measures adopted by the ECB to boost liquidity will fail to stem the region’s crisis. The MSCI Asia Pacific Index (MXAP) of regional shares fell 0.7 percent.
Yields on Italian and Spanish two-year government bonds rose yesterday after the Frankfurt-based ECB allotted 489 billion euros in three-year loans, almost double the median estimate in a Bloomberg News survey of economists.
“I think we’re still at the beginning of the crisis and nowhere near towards the end,” said Keagan York, the Sydney- based head of foreign-exchange strategy at Compass Global Markets. “The ECB loans operation was only a temporary measure to get some liquidity back into the markets. You’ll see the Aussie start to drift back off.”
The Australian dollar declined 0.2 percent to $1.0082 and New Zealand’s currency fell 0.3 percent to 76.82 U.S. cents.
To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
