BLBG:Euro Set for First Back-to-Back Annual Drop Since 2001 on European Crisis
The euro is set for its first back- to-back annual drop versus the dollar since 2001 on concern Europe’s debt crisis will weigh on the region’s economic growth.
The 17-nation euro traded 0.3 percent from a decade low against the yen before data next week forecast to confirm European manufacturing contracted for a fifth month. The Australian and New Zealand strengthened for a second day versus the greenback as Asian stocks rose before reports that may indicate a U.S. recovery. China’s yuan climbed to a 17-year high on signs the nation’s central bank favors the currency’s appreciation to prevent capital outflows.
“We’ve been reasonably negative on the euro,” said Michael Turner, a fixed-income and currency strategist at Royal Bank of Canada in Sydney. “The euro area’s probably in a mild recession already.”
The euro slid 0.1 percent to $1.2943 as of 1:53 p.m. in Tokyo. The shared currency dipped 0.3 percent to 100.34 yen. It touched 100.06 yen yesterday, the lowest since June 2001. The dollar fetched 77.53 yen from 77.64.
The euro is set to fall 3.3 percent against the greenback and 7.5 percent versus the yen this year.
The Australian dollar, nicknamed the Aussie, advanced 0.2 percent to $1.0155. New Zealand’s currency gained 0.2 percent to 77.25 U.S. cents.
The MSCI Asia Pacific Index rose 0.2 percent. The MSCI World Index of stocks added 0.8 percent yesterday and the Standard & Poor’s 500 (SPX) Index rallied 1.1 percent.
Merkel, Sarkozy
A gauge of euro-region manufacturing rose to 46.9 in December from 46.4 the previous month, according to the median estimate of economists in a Bloomberg News survey before London- based Markit Economics releases the data on Jan. 2. That would be in line with a Dec. 15 initial estimate. A reading below 50 indicates contraction.
French President Nicolas Sarkozy will go to Berlin on Jan. 9 to resume talks with German Chancellor Angela Merkel on ending the region’s debt crisis, an official familiar with the matter said. The leaders aim to complete by March revisions to Europe’s fiscal rulebook following decisions made at a Dec. 9 summit and are reassessing plans to cap the overall lending of their permanent rescue facility at 500 billion euros ($647 billion).
The Australian and New Zealand currencies advanced on prospects signs of a recovery in the U.S. economy will boost demand for higher-yielding assets.
The Institute for Supply Management’s factory index (NAPMPMI), a gauge of U.S. manufacturing, probably rose to 53.2 in December from 52.7 in November, a Bloomberg poll showed before the data are released on Jan. 3. Readings above 50 indicate expansion.
‘Recovery Path’
Riskier assets will rise “if we can confirm that the U.S. economy is on a recovery path from the economic data next week,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp., a currency margin company.
Growth in the world’s biggest economy will quicken to 2.1 percent in 2012 from 1.8 percent this year, according to a Bloomberg survey of banks and securities companies.
The Aussie has appreciated 0.2 percent in 2011, while its New Zealand counterpart gained 0.3 percent, according to Bloomberg Correlation-Weighted Indexes. The dollar has advanced 1.5 percent over the same period, the second-best performer among the 10 developed-nation currencies tracked by the gauge.
“More than likely, U.S. dollar strength is going to continue into next year,” RBC’s Turner said. A hampered recovery in Europe “will flow into slightly weaker growth in Asia, including China.”
China’s Production
An index of China’s purchasing managers was 48.7 in December, HSBC Holdings Plc and Markit Economics said today, signaling the nation’s manufacturing contracted for a second month. That compared with a preliminary result of 49 reported on Dec. 15 and a final reading of 47.7 for November. A reading above 50 signals expansion.
The Chinese yuan advanced as central bank policy makers set its reference rate (CNYMUSD) 0.23 percent stronger at 6.3009 against the greenback, the strongest level since a dollar peg ended in 2005.
The yuan gained 0.13 percent to 6.3110 per dollar, according to the China Foreign Exchange Trade System. It earlier touched 6.3070, the highest level since the country unified official and market exchange rates at the end of 1993.
To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net
To contact the editor responsible for this story: Naoto Hosoda at nhosoda@bloomberg.net
