BLBG:Euro Approaches 11-Year Low Versus Japanese Yen Before French Bond Sales
The euro approached an 11-year low against the yen before France sells bonds today on concern the region’s governments and banks will struggle to raise funds.
The 17-nation currency slumped against most major peers after Greek Prime Minister Lucas Papademos warned his country may face economic collapse as soon as March. The Australian and New Zealand dollars weakened against the greenback as losses in Asian stocks (MXAP) sapped demand for higher-yielding assets. The yuan dropped after China’s central bank lowered the daily reference rate by the most since November amid concern Europe’s debt crisis will cool demand for the nation’s goods.
“There will be steady pressure on the euro in terms of rolling over existing debt and issuing new debt,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney, Australia’s second-largest lender. “There’s really been nothing that would make you want to even play for an interim bounce in the euro.”
The euro fell 0.2 percent to 99.13 yen as of 6:53 a.m. in London from 99.29 yen in New York yesterday. It touched 98.66 yen on Jan. 2, the weakest since December 2000. Europe’s common currency declined 0.2 percent to $1.2916. The dollar was little changed at 76.74 yen.
The euro slid 2.9 percent over the past month, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, as investors sought safety amid the region’s turmoil. The dollar rose 1.2 percent and the yen climbed 2.8 percent.
Ratings Outlook
“The only safe havens at the moment are the U.S. dollar and the Japanese yen,” said Callum Henderson, global head of foreign-exchange research in Singapore at Standard Chartered Plc.
The euro will drop to $1.20 by March 31, Henderson predicted. The median forecast of analysts polled by Bloomberg News is for the currency to trade at $1.28 by the end of the first quarter.
France will auction bonds maturing from 2021 to 2041 today after yesterday’s German sale of 10-year bonds attracted weaker demand than the average over the past five years.
France’s credit outlook was lowered by Fitch Ratings on Dec. 16 on the “heightened risk of contingent liabilities” from the escalating euro-region crisis. Standard & Poor’s is reviewing the top ratings of both France and Germany.
Papademos warned that deeper cuts in incomes are the only way Greece can remain in the euro area and receive more financing from international creditors, according to an e-mailed transcript of his statements to union and business leaders yesterday.
The size of the euro zone’s European Financial Stability Facility “remains insufficient,” Italian Prime Minister Mario Monti said in an interview with Le Figaro.
‘No Progress’
“There’s been no progress in terms of resolving the crisis,” said Mitul Kotecha, head of global currency strategy in Hong Kong at Credit Agricole CIB. “Risk-aversion can still weigh,” on currencies such as the Australian and New Zealand dollars, he said.
The MSCI Asia Pacific Index of stocks fell 0.6 percent. The Australian currency declined 0.5 percent to $1.0317 and 79.16 yen. New Zealand’s dollar weakened 0.2 percent to 78.59 U.S. cents.
The so-called Aussie weakened against the majority of its most-traded peers after a report showed the nation’s trade surplus (AUITGSB) unexpectedly narrowed in November as shipments abroad of resources slowed.
Exports exceeded imports by A$1.38 billion ($1.4 billion), from a revised A$1.42 billion surplus in October, the Bureau of Statistics said, compared with the median estimate for a surplus of A$1.65 billion.
Yuan Weakens
The yuan declined after the People’s Bank of China set the fixing 0.18 percent weaker, the biggest reduction since Nov. 15, at 6.3115 per dollar.
The yuan fell 0.1 percent to 6.3026, according to the China Foreign Exchange Trade System. It touched 6.2919 yesterday, the strongest since the country unified official and market exchange rates at the end of 1993. The currency is allowed to trade 0.5 percent on either side of the daily fixing.
Gains in the dollar were limited before the release of data that is forecast to signal U.S. economic expansion is being sustained, which may damp demand for safer assets.
A report from the Institute for Supply Management will probably show U.S. service industries (NAPMNMI) expanded in December at the fastest pace in three months, according to a Bloomberg News survey of economists. The ISM’s non-manufacturing index climbed to 53 from 52 in November, according to the median estimate.
Private employment, which excludes government jobs, probably climbed 178,000 last month, a separate Bloomberg poll projected before data from Roseland, New Jersey-based ADP Employer Services is released today.
To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net
To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net
