BLBG:Euro Near Three-Month Low on Greek Leadership Concern
The euro weakened for a seventh day against the dollar as Greek politicians struggled to form a new government after elections on the weekend raised the prospect of the country withdrawing from the currency bloc.
The 17-nation euro extended its longest run of declines against the greenback since September 2008 as German Chancellor Angela Merkel rejected government stimulus as the way to spur economic growth, setting up a clash with French president-elect Francois Hollande. The pound dropped against the dollar as a report showed U.K. house prices fell in April. Australia’s dollar declined after the trade deficit widened.
“It’s hard to be anything but bearish” on the euro, said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “The Franco-German alliance is being destabilized but more importantly there’s this risk of contagion in Greece, particularly into the banking system.”
The euro declined 0.2 percent to $1.3024 at 6:18 a.m. in New York after sliding to $1.2955 yesterday, the weakest level since Jan. 25. The shared currency dropped 0.4 percent to 103.88 yen. It slipped to 103.24 yesterday, the lowest since Feb. 16. The yen gained 0.2 percent to 79.77 per dollar.
New Democracy leader Antonis Samaras said yesterday he failed to forge agreement to form a Greek government after weekend elections. The attempt will pass to Alexis Tsipras, the head of Syriza, the second biggest party, which has vowed to cancel bailout terms for the nation. Tsipras will see President Karolos Papoulias today at 2 p.m. in Athens.
‘Pin Is Removed’
“They passed on the mandate to the second-biggest political group, which is against austerity and hence by default for an exit out of the euro zone,” Sebastien Galy, a senior foreign-exchange strategist at Societe Generale SA in New York, wrote in a note to clients. “The grenade has been passed on, the pin is removed as it has been for the past two years.”
Hollande’s platform calls for policies Germany’s Merkel opposes, including increased spending and delayed deficit cuts. Merkel invited Hollande to Berlin for talks “as soon as possible,” a statement from her government said on May 6.
“This discussion is not whether we should pursue consolidation or growth, it’s completely clear that we need both,” Merkel told reporters in Berlin yesterday. “Rather, I think the core of the discussion is whether we again need debt- financed economic programs, or whether we need growth elements that are sustainable and oriented toward the economic strength of certain countries.”
The euro has weakened 4.1 percent over the past six months, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The dollar rose 2.6 percent, and the yen dropped 0.3 percent.
Pound Drops
The pound declined from within two U.S. cents of an eight- month high against the dollar after an industry report showed a gauge of house prices declined.
The Royal Institution of Chartered Surveyors said its index dropped to minus 19 from minus 11 in March. A reading below zero means more surveyors saw price declines than increases.
The pound dropped 0.3 percent to $1.6135 after rising to $1.6302 on April 30, the highest level since Aug. 31. Sterling was little changed at 80.65 pence per euro.
Australia’s dollar declined for the sixth time in seven days after the nation reported a larger-than-estimated trade deficit in March amid concern spending cuts by the government will damp economic growth.
The currency also depreciated as the government announced its first reduction in spending in at least 42 years as Prime Minister Julia Gillard plans to return the budget to a surplus and give the central bank scope to cut interest rates.
‘Peeling Away’
“Factors that supported the Australian dollar are peeling away,” said Yoshisada Ishide, who manages the world’s biggest mutual fund focusing on Australian dollar-denominated bonds at Daiwa SB Investments Ltd. in Tokyo. “Markets understand that Australia’s government can’t take stimulus measures and that it has to rely on monetary policy” to support growth.
The Australian dollar declined 0.6 percent to $1.0137 after dropping to $1.0110 yesterday, the lowest since Dec. 29.
New Zealand’s currency is set to extend losses after falling below the so-called cloud on a weekly ichimoku chart, according to Barclays Capital.
The kiwi has breached the lower end the cloud “clearly” for the first time since 2008, Masafumi Yamamoto, chief currency strategist in Tokyo at Barclays, wrote in a note to clients. The currency may target 77.9 U.S. cents, which is the 61.8 percent retracement of its advance from the November low to the February high, he said, citing Fibonacci analysts.
The New Zealand dollar dropped 0.7 percent to 78.93 U.S. cents after falling to 78.83 cents, the weakest since Jan. 13.
Ichimoku charts are used to predict a currency’s direction by analyzing the midpoints of historical highs and lows. The cloud refers to the area between the first and second leading- span lines on the chart and is used to show an area where buy orders may be clustered.
To contact the reporters on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
