BLBG:Euro Set for Biggest Weekly Decline in a Month
The euro was set for the biggest weekly decline in a month amid concern leadership changes in French and Greek elections this weekend could derail the region’s austerity efforts.
The 17-nation currency was 0.3 percent from the lowest in almost two years versus the pound before a private report economists say will confirm services and manufacturing output in the euro region shrank for a third month. The Dollar Index was poised for a weekly gain before U.S. data forecast to show employment increased last month in the world’s biggest economy.
“Markets are concerned about what new leaders will do,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. Euro demand may see “a more negative impact because of some uncertainties ahead.”
The euro was at $1.3142 at 8:22 a.m. London time from $1.3152 in New York yesterday. It has lost 0.8 percent this week, the biggest drop since the period ended April 6. The common currency was little changed at 105.37 yen. It was at 81.25 pence against the pound after reaching 81.03 yesterday, the weakest level since June 2010. The dollar was unchanged at 80.17 yen.
Japan’s markets are shut today for a public holiday.
France and Greece are both scheduled to hold elections on May 6, with French voters casting ballots in the final round of the country’s presidential race and Greeks set to decide on a new parliament.
Emphasis on Growth
Francois Hollande, the Socialist challenger for the French presidency who is leading incumbent Nicolas Sarkozy in opinion polls, has called for a re-negotiation of the budget pact crafted by European leaders in March, saying it needs to place more emphasis on growth. He has rejected a Sarkozy plan to raise sales taxes to fund a cut in payroll charges.
In Greece, neither of two major political parties that have supported the nation’s international bailouts -- New Democracy and Socialist Pasok -- is likely to win an outright majority in the 300-seat parliament.
The French and Greek votes “add to the uncertainty” in the euro area, said Kurt Magnus, executive director of foreign- exchange sales in Sydney at Nomura Holdings Inc.
A euro-area composite index for services and manufacturing industries was at 47.4 in April, according to economist estimates before London-based Markit Economics releases its final reading of the gauge today. A reading below 50 indicates contraction.
U.S. Jobs
“Any downward revisions from the preliminary reading should maintain expectations for lower yields and a weaker euro,” BNP Paribas SA strategists, including Steven Saywell, head of foreign-exchange strategy for Europe, wrote in a research note. “As such we reiterate our euro-dollar call for $1.28 by the end of this quarter.”
The euro has added 0.7 percent over the past three months while the dollar has risen 0.8 percent, according to Bloomberg Correlation-Weighted Indexes tracking 10 developed-nation currencies. The British pound has been the biggest gainer, with a 3.4 percent advance.
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 79.243 and has risen 0.7 percent since April 27.
U.S. employers added 160,000 jobs last month after a 120,000 increase in March, according to the median estimate of economists before the Labor Department releases its monthly jobs report today.
Dollar-Euro ‘Battle’
“It’s a battle between U.S. dollar weakness and euro weakness, which is the reason the euro is so stuck,” said Nomura’s Magnus. The payrolls figure may be around 200,000, and that would help drive up the Dollar Index (DXY) to about 79.8, according to Magnus.
Implied volatility for three-month options on the euro versus the greenback was at 9.665 percent today. It touched 9.47 percent on April 27, the least since August 2008. Implied volatility, which traders quote and use to set option prices, signals the expected pace of currency swings.
The euro may advance versus the New Zealand dollar after gaining as much as 1.4 percent yesterday to climb above a March high of NZ$1.6399, according to JPMorgan Chase & Co.
“The break of the 1.64 resistance area and March high suggests a deeper corrective phase is underway,” Niall O’Connor, a technical analyst in New York at JPMorgan, wrote in a research note yesterday, citing Fibonacci analysis. The focus now is a NZ$1.6560-1.6570 range that includes the 38.2 percent retracement from a November high, O’Connor wrote. The 38.2 percent retracement from November’s high to February’s low is NZ$1.6562.
Fibonacci analysis is based on the theory prices rise or fall by certain percentages after reaching a new high or low. Support is an area on a price graph where buy orders may be clustered.
The European currency was little changed at NZ$1.6440 today.
To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net.
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
