BLBG: Euro Falls to 10-Year Low Against Yen as ECB Balance Sheet Reaches Record
The euro dropped against the yen to the lowest level since 2001 as the European Central Bank’s balance sheet soared to a record after it lent regional banks more money last week to keep credit flowing.
The 17-nation currency fell against the dollar to the lowest level since January as concern increased that the region’s sovereign-debt crisis will curb growth, even as rates fell at an Italian bill sale. The dollar gained as stocks dropped, boosting demand for haven assets. The yen advanced on a safety bid after a U.S. Treasury report criticized Japan for intervening in the currency market and as economic reports signaled slowing economic growth.
“We’re still so far from being out of the woods that even on a day of being positive, people decided that the euro should continue to fall,” said David Mann, regional head of research for the Americas at Standard Chartered Plc. in New York. “It’s quite a sharp rise in the ECB balance sheet. It’s concern about monetization already on the way in Europe.”
The euro dropped 1 percent to 100.81 yen at 12:14 p.m. in New York. It touched 100.73 yen, the lowest since 2001. The shared currency fell 1.2 percent to $1.2919, touching $1.2912, the least since Jan. 11. The dollar rose 0.2 percent to 78 yen.
The euro has depreciated 1.6 percent this year against nine developed-nation counterparts as Europe’s debt crisis intensified, according to Bloomberg Correlation-Weighted Currency Indexes. The dollar has advanced 1.6 percent, and the yen has gained 4.5 percent.
Weaker Rand
South Africa’s rand has declined 18.8 percent against the dollar in 2011, the most of the U.S. currency’s major peers, according to data compiled by Bloomberg, followed by Mexico’s peso, with an 11.8 percent loss. The yen has advanced 4 percent for the only gain against the greenback among the most-traded.
The ECB’s balance sheet expanded to a record 2.73 trillion euros ($3.55 trillion). Lending to euro-area banks jumped 214 billion euros to 879 billion euros in the week ended Dec. 23, the Frankfurt-based ECB said in a statement today.
The balance sheet increased by 239 billion euros in the latest period and was 553 billion euros more than three months ago.
The common currency’s drop was exacerbated by a break below a support level at $1.3156, according Sebastien Galy, a senior foreign-exchange strategist at Societe Generale SA in London.
Italy sold 9 billion euros of 179-day bills at a rate of 3.251 percent, down from 6.504 percent at the previous auction of similar-maturity debt on Nov. 25. The Treasury also sold 1.7 billion euros of zero-coupon bonds due in September 2013 at a yield of 4.85 percent, versus 7.81 percent on Nov. 25.
Italian Offering
The nation will auction as much as 8.5 billion euros of debt due between 2014 and 2022 tomorrow.
Italian 10-year bond yields pared a drop after falling as much as 25 basis points to 6.75 percent. They traded at 6.94 percent, compared with more than 7 percent reached yesterday, the level that spurred Greece, Ireland and Portugal to seek bailouts.
The Treasury Department, in a semi-annual report to Congress on the currency policies of major trading partners, criticized Japan, which unilaterally sold the yen twice in the foreign-exchange market after Group of Seven economies jointly intervened after the March earthquake.
The operations in August and October took place when market conditions were orderly and global economic developments were affecting other major currencies as well, the report said.
China Policy
The report also declined to brand China a manipulator of its exchange rate, while calling the yuan undervalued and vowing to press for further appreciation of the currency. Trading in the currency is limited to a band set daily by the People’s Bank of China. It’s allowed to move 0.5 percent on either side of that rate.
The yen also rose on demand for a refuge after reports showed industrial production and retail sales dropped in November more than forecast.
Industrial output decreased 2.6 percent in November from the previous month, the trade ministry said in Tokyo today. The median estimate of 29 economists surveyed by Bloomberg News was for output to fall 0.8 percent.
Retail sales fell 2.3 percent last month from the previous year. Economists estimated the measure would be unchanged, according to a separate Bloomberg News survey.
To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net
To contact the editor responsible for this story: Robert Burgess at bburgess@bloomberg.net
