BLBG:Euro Drops to 11-Year Low Versus Yen Before Merkel, Sarkozy Meet
The euro (EUR) fell to an 11-year low against the yen and dropped to its least in nearly 16 months versus the dollar before the German and French leaders meet amid signs the region’s sovereign-debt crisis is hurting growth.
The 17-nation euro slid versus most major counterparts before bond sales by Spain and Italy this week after yields rose. A report today is forecast to show industrial production in Germany, Europe’s biggest economy, declined in November. The dollar gained after data last week showed the U.S. labor market is strengthening. Australia’s currency, nicknamed the Aussie, dropped after retail sales were unchanged in November.
“We’re going to see more ongoing political noise and that’s really just a distraction from the bigger driver of the euro, which is the relatively weak growth outlook,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “As long as European growth underwhelms, the euro will continue to underperform the U.S. dollar, yen and probably also the rest of the major currencies.”
The euro fell 0.3 percent to 97.61 yen as of 8:33 a.m. in Singapore after earlier touching 97.28, the least since December 2000. The shared currency declined 0.3 percent to $1.2681 and earlier reached $1.2666, its lowest level since September 2010. The dollar was little changed at 76.98 yen. The Aussie lost 0.7 percent to $1.0159 from Jan. 6.
Japan’s markets are closed today for a public holiday.
Merkel, Sarkozy Meeting
German Chancellor Angela Merkel and French President Nicolas Sarkozy meet in Berlin today to flesh out a new rulebook for fiscal discipline negotiated at a Dec. 9 summit that seeks to create a “fiscal compact” for the 17-member euro area. The talks will be followed by a joint press conference.
Spain is scheduled to sell bonds due in 2015 and 2016 on Jan. 12. Italy will auction securities on the same day and on Jan. 13. Spain’s 10-year bond yield (GSPG10YR) climbed seven basis points, or 0.07 percentage point, to 5.71 percent on Jan. 6, while the rate on Italian debt (GBTPGR10) of similar-maturity gained four basis points to 7.13 percent, passing the 7 percent threshold that led Greece, Portugal and Ireland to seek bailouts.
German industrial production (GRIPIMOM) probably dropped 0.5 percent in November after an 0.8 percent increase the previous month, according to the median estimate of economists surveyed by Bloomberg News before the figures are released today. That would be the first slide (GRIPIMOM) since September.
‘Steady Underperformance’
Futures traders increased their bets (.ECLRG) to a record high that the euro will decline against the dollar. The difference between wagers the shared currency would fall versus those that it would rise -- so-called net shorts -- surged to 138,909 in the week ended Jan. 3, according to the Commodity Futures Trading Commission.
“There is legitimate concern over the path to sustainable sovereign debt levels,” Emma Lawson, a currency strategist at National Australia Bank Ltd. in Sydney, wrote in a report today. “With the U.S. data improving, and the European numbers still soft, the euro is likely to continue its steady underperformance.”
The dollar rose against 13 of its 16 most-traded peers after data from the Labor Department on Jan. 6 showed payrolls in the U.S. climbed by 200,000 last month after a revised 100,000 gain in November. The jobless rate (USURTOT) unexpectedly fell to 8.5 percent, the lowest level since February 2009.
Confidence (SBOITOTL) among U.S. small companies rose in December for a fourth month, economists in a Bloomberg poll predicted before tomorrow’s report. The National Federation of Independent Business’s index probably climbed to 94, the highest level since February 2011, from November’s 92, according to the survey median.
‘Fundamental Shift’
“The correlation between good U.S. data equaling a weak dollar is beginning to break down now that we’re seeing signs of a more sustained recovery in the U.S.,” said Bank of New Zealand’s Jones. “There’s a clear fundamental shift in favor of the U.S. dollar.”
Alcoa Inc., the largest U.S. aluminum producer, plans to release results today after markets close, the first company in the Dow Jones (INDU) Industrial Average to report. The Dow rose 5.5 percent last year, while the Stoxx Europe 600 Index fell 11 percent and the MSCI Asia Pacific Index plunged 17 percent.
To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net
