BLBG:Euro Weakens to Three-Week Low Before Germany-Italy Meeting, Bond Sales
The euro dropped to a three-week low before German and Italian leaders meet tomorrow ahead of a finance ministers’ gathering next week to decide on a second bailout package for Greece.
The 17-nation currency slid for a second day versus the yen before Spain and France sell debt amid concern a delay in Greek aid will increase borrowing costs for the region. The dollar strengthened as Asian stocks fell and Moody’s Investors Service said it’s reviewing banks including UBS AG and Credit Suisse Group AG for possible downgrades. Australia’s currency climbed versus its New Zealand counterpart after a report showed the larger nation’s unemployment rate unexpectedly declined.
“The Greek situation is in the ‘too hard’ basket and my target for euro before the end of February is $1.25,” said Kurt Magnus, executive director of currency sales in Sydney at Nomura Holdings Inc. “The market has lost faith, and it’s evident that there’s no conviction in being long risk in the equity market or long euro.” A long position is a bet an asset value will rise.
The shared currency lost 0.3 percent to $1.3022 as of 2:57 p.m. in Tokyo after earlier sliding to $1.3008, the lowest level since Jan. 25. The euro weakened 0.3 percent to 102.14 yen. The dollar was unchanged at 78.43 yen.
The MSCI Asia Pacific Index of stocks slumped 1.1 percent.
Merkel, Monti Meet
German Chancellor Angela Merkel will travel to Rome tomorrow for talks with Italian Prime Minister Mario Monti, her spokesman Steffen Seibert said yesterday in Berlin. The leaders will hold a joint press conference after the meeting.
France and Spain are scheduled to auction as much as 14.3 billion euros ($18.6 billion) in bonds today, three days after Moody’s cut the ratings of six European nations including Spain and revised its credit outlook on France to “negative.”
France plans to sell as much as 8.5 billion euros in two-, three-and five-year bonds, while Spain aims to sell a maximum of 4 billion euros in securities maturing in January and July 2015 and October 2019. France is also auctioning as much as 1.8 billion euros of index-linked bonds. The Netherlands will offer $2 billion in debt due 2017.
While “further considerations are necessary regarding the specific mechanisms to strengthen the surveillance of program implementation,” Europe is set to make “all the necessary decisions” on 130 billion euros in aid for Greece at a Feb. 20 meeting, Luxembourg Prime Minister Jean-Claude Juncker said in an e-mailed statement after chairing a conference call of euro- area finance ministers yesterday.
Worst Performer
The euro has depreciated 1 percent in the past week, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar was the biggest gainer, having added 1.3 percent.
The dollar advanced versus most major counterparts as Moody’s said it may lower UBS, Credit Suisse and Morgan Stanley’s ratings by as many as three levels. Goldman Sachs Group Inc., Deutsche Bank AG, JPMorgan Chase & Co. and Citigroup Inc. are among companies that may be downgraded by two grades, the ratings company said, adding that the “guidance is indicative only.”
Moody’s ratings warnings “keep the focus on the big issues out there facing credit markets and banks,” said Jim Vrondas, a manager at the online foreign-exchange dealer OzForex Ltd. in Sydney. “It does add to the uncertainty around Europe at the moment and though it’s not totally unexpected, it does seem to be on a massive scale. We will see the U.S. dollar relatively well supported on dips.”
The so-called Aussie dollar climbed by the most in a week against New Zealand’s currency after Australia’s statistics bureau said the jobless rate dropped to 5.1 percent in January as payrolls climbed by 46,300. That was better than the median economist estimate in a Bloomberg News survey, which called for an unemployment rate of 5.3 percent and a 10,000-job increase.
Rate Bets
“The Australian dollar rose very sharply after the jobs release,” said Andrew Salter, a strategist at Australia & New Zealand Banking Group Ltd. in Sydney. “The Reserve Bank is going to follow the unemployment rate most closely in its monetary policy deliberations,” so a rate cut in March will now depend on the events unfolding in Europe, he said.
Traders are betting on a 40 percent chance the RBA will lower its benchmark rate on March 6 from 4.25 percent, according to a Credit Suisse Group AG index based on swaps. The probability of a cut was 56 percent yesterday.
The Australian dollar rose 0.5 percent to NZ$1.2898.
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: Rocky Swift at rswift5@bloomberg.net
