BLBG:Euro Declines to Three-Week Low on Greece Debt Concern; Dollar Strengthens
The euro declined to a three-week low against the dollar as European leaders were divided over a rescue for Greece, sapping demand for the region’s assets.
The 17-nation currency fell for a fifth day versus the greenback 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 dollar rose after Moody’s Investors Service said it’s reviewing banks including UBS AG and Credit Suisse Group AG for possible downgrades. Sweden’s krona weakened after the central bank cut interest rates
“The Greek situation will weigh on the euro,” said Neil Jones, head of European hedge fund sales at Mizuho Corporate Bank Ltd. in London. “There seems to be doubt among major economies about Greece’s ability and commitment in implementing the austerity program. The fact that short euro positions had recently been lightened up makes the currency vulnerable to a sell off.” A short position is a bet an asset will fall.
The euro declined 0.5 percent to $1.2998 at 9:11 a.m. in London after sliding to $1.2983, the lowest level since Jan. 25. The common currency weakened 0.1 percent to 102.40 yen. The dollar gained 0.5 percent to 78.78 yen.
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.
‘Necessary Decisions’
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.
France and Spain are scheduled to auction as much as 14.3 billion euros 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.”
The Dollar Index (DXY), which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, climbed 0.4 percent to 80.019 after rising to 80.078, the highest since Jan. 25.
Moody’s, which is reviewing 17 banks and securities firms with global capital markets operations, said it may cut the ratings of UBS, Credit Suisse and Morgan Stanley 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 ranks, Moody’s said in a statement.
The krona fell to a two-week low against the dollar as the central bank cut interest rates for a second meeting to prevent a recession. Policy makers reduced the benchmark by a quarter of a percentage point to 1.5 percent.
The krona dropped 0.7 percent to 6.7698 per dollar after falling to 6.7767, the weakest since Feb. 1.
To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
