BLBG:Euro Trades Below $1.30 as Webber Says Greek Default Is Possible
The euro traded below $1.30 for a second day as UBS AG Chairman and former European Central Bank governing council member Axel Weber said there was still a risk of a Greek default.
The 17-nation currency was 0.2 percent from a three-month low against the dollar as a Bloomberg Global Poll showed more than 50 percent of investors predict one of the euro members will exit the currency bloc this year. The pound fell for a third day versus the greenback as some economists forecast the Bank of England will boost its asset-purchase program at a meeting today. Sweden’s krona weakened as inflation slowed for a second month in April.
“There’s still a lot of uncertainty from Greece and that’s been weighing on the euro,” said Jennifer Hau, a foreign- exchange strategist at Lloyds Banking Group Plc in London. “Sentiment toward the euro is going to remain weak and we’ll probably continue to see a downside bias in euro-dollar. The market will likely sell on the rallies.”
The euro was little changed at $1.2944 at 6:44 a.m. New York time after falling to $1.2912 yesterday, the lowest since Jan. 23. This would be first time it closed below $1.30 for two days since Jan. 20. The shared currency gained 0.1 percent to 103.10 yen. It slipped to 102.76 yesterday, the weakest since Feb. 16. The yen was little changed at 79.65 per dollar.
The risk of a hard default in Greece “is not off the table,” Weber said at a conference in London today. Spain’s problems carry an “extremely high contagion risk for Italy” and the rest of Europe, Webber, who’s also a former head of Germany’s Bundesbank, said.
Political Stalemate
As Greece faces political paralysis and voters protest against austerity measures, 57 percent of the 1,253 investors, analysts and traders who are Bloomberg subscribers said at least one country will abandon the euro by year-end. With a majority identifying a deterioration in Europe as a large threat to the world economy, respondents to the May 8 survey were worried Spain will default.
Evangelos Venizelos, the leader of Greece’s Pasok party, said he will support a government that is pro-European and that he rejects freezing the country’s bailout terms. Venizelos is due to receive a three-day mandate to form a government today from President Karolos Papoulias.
“The recent political developments in the euro zone are likely to weigh on the euro throughout the summer” even as the currency gets short-term support after hitting key technical levels, said Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London. “There’s a lack of unity, a lack of co-ordination.”
Pound Falls
Sterling weakened against 12 of its 16 major counterparts as eight of 51 economists surveyed by Bloomberg predict policy makers will increase the quantitative easing operations by at least 25 billion pounds ($40 billion).
The central bank will keep its benchmark rate at a record low 0.5 percent, another surveyed showed.
The pound dropped 0.1 percent to $1.6111 after falling to $1.6067 yesterday, the lowest level since April 20. Sterling declined 0.2 percent to 80.30 pence per euro.
The krona fell 0.5 percent to 8.9477 per euro, and weakened 0.4 percent to 6.9117 per dollar.
The Swedish inflation rate slowed to an annual 1.3 percent from 1.5 percent in March, Statistics Sweden said.
To contact the reporter on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
