BLBG:Euro Declines Against Yen, Dollar After Italy Auctions Notes
The euro weakened versus the yen and the dollar after Italian borrowing costs declined less at a note sale today than when the country auctioned bills yesterday.
The 17-nation currency dropped against all but two of its 16 major counterparts as concern recent measures by European leaders may still fail to resolve the region’s debt crisis. The Dollar Index (DXY) headed for a weekly decline before a U.S. report that economists said will show consumer confidence improved this month, reducing demand for the U.S. currency as a haven.
“Expectations were built up quite significantly following yesterday’s auction,” said Ian Stannard, head of European currency strategy at Morgan Stanley in London. “Any rebound we see in euro-dollar is going to remain limited, and we remain bearish over the medium term.”
The euro dropped 0.3 percent to 98.10 yen at 10:56 a.m. London time, after earlier rising as much as 0.5 percent. The currency fell 0.2 percent to $1.2788, paring this week’s advance to 0.6 percent. The dollar was little changed at 76.72 yen.
The single currency is likely to weaken toward $1.25 by the end of March, and decline to around $1.20 later in the year, Stannard said.
Italy sold 3 billion euros of notes due in November 2014 today at an average yield of 4.83 percent, down from 5.62 percent at a previous auction on Dec. 29. It also sold debt due in July 2014 and August 2018. Yesterday, the nation sold one- year bills at 2.735 percent, more than half of the 5.952 percent yield at the prior sale on Dec. 12.
Credit Shortage
The euro strengthened yesterday after European Central Bank President Mario Draghi said policy makers have averted a credit shortage.
Speaking in Frankfurt after the ECB’s policy meeting, Draghi said the central bank’s massive injection of cash into the financial system last month is beginning to flow through into credit markets. “There are tentative signs of stabilization of economic activity,” he said. Policy makers kept the benchmark rate at a record low of 1 percent.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, was little changed at 80.928, having declined 0.4 percent this week.
The Thomson Reuters/University of Michigan preliminary consumer confidence index rose to 71.5 for January from 69.9 in the previous month, according to a Bloomberg survey before today’s report.
The dollar has depreciated 0.5 percent in the past week, the second-worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro has risen 0.1 percent.
To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; Keith Jenkins in London at kjenkins3@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
