BLBG:Euro Falls to 3-Month Low on Greece; Aussie Breaches pari
The euro fell to its lowest level in more than three months against the dollar as a leadership vacuum in Greece prompted European officials to weigh prospects for the currency union’s first-ever departure of a member state.
The 17-nation currency fell for a second day versus the yen as Greek President Karolos Papoulias prepares for another day of discussions with political party leaders on forming a national unity government. Euro-area industrial production slowed in March, economists said before a report today. The Dollar Index (DXY) gained for 11th day as the European debt crisis boosted demand for safer assets. Australia’s dollar dropped below parity with the greenback as investors sold higher-yielding currencies.
“As Greece emerges from the weekend without a government, we’re seeing some toll taken on the euro,” said Mike Jones, a currency strategist at Bank of New Zealand in Wellington. “Politics and debt sentiment aside, the big negative for the euro this year will be economic underperformance.”
The euro fell 0.2 percent to $1.2886 at 8:15 a.m. in London after sliding to $1.2879, the weakest since Jan. 23. The currency dropped 0.1 percent to 103.18 yen. It depreciated 1.2 percent last week. The dollar gained 0.1 percent to 80.04 yen.
Alexis Tsipras, who heads Greece’s Syriza party, won’t attend today’s meeting, state-run NET TV reported. Syriza, the largest anti-bailout party, rejected a unity government last week following inconclusive elections on May 6. Greece may face another vote unless leaders can agree on a new coalition.
Greece Standoff
The standoff has reignited concern the country will renege on pledges to cut spending under the two bailouts negotiated since May 2010, and, ultimately, leave the euro area. The region’s finance ministers are set to meet at 5 p.m. in Brussels and may discuss aid for Greece.
A Greek withdrawal “is not necessarily fatal, but it is not attractive,” European Central Bank Governing Council member Patrick Honohan said in Tallinn, Estonia, on May 12.
German Chancellor Angela Merkel’s Christian Democratic Union party received its lowest share of the vote since World War II in a North Rhine-Westphalia ballot yesterday. The state is Merkel’s biggest electoral test this year before the federal vote due in the second half of 2013.
The euro also weakened before a report today forecast to show growth in industrial production in the region slowed to 0.4 percent from 0.8 percent in February, according a Bloomberg News survey. From a year earlier, output is predicted to have fallen 1.4 percent.
Aussie Falls
Australia’s dollar declined below parity with its U.S. counterpart for the first time this year amid concern that Greece will leave the euro bloc, curbing demand for higher- yielding currencies.
“Greece’s exit from the euro is becoming more and more a mainstream discussion, and this is potentially destabilizing for markets,” said Emma Lawson, a currency strategist in Sydney at National Australia Bank Ltd. (NAB) “In this generally risk-off environment, the risk is to the downside in the Aussie,”
Australia’s dollar fell 0.2 percent to $1.0003 after sliding to 99.96 U.S. cents, the lowest since Dec. 20. New Zealand’s currency declined 0.4 percent to 77.98 U.S. cents.
The Dollar Index extended its daily winning streak to the longest since Bloomberg began tracking the gauge in 1996. The Index, which IntercontinentalExchange Inc. uses to measure the currency against those of six major U.S. trade partners, rose 0.2 percent to 80.45.
‘In Vogue’
Haven currencies such as the greenback “are very much in vogue,” Bank of New Zealand’s Jones said. “There’s some good reasons at the moment to buy the dollar.”
The euro may extend its decline toward $1.2828 after falling below its 61.8 Fibonacci retracement level at $1.2954 last week, Bank of Tokyo-Mitsubishi UFJ Ltd. wrote in a report.
The $1.2828 level is the 76.4 percent retracement of the euro’s advance from this year’s low of $1.2624 on Jan. 13 to a high of $1.3487 on Feb. 24, according to data compiled by Bloomberg. Fibonacci analysis is based on the theory that prices increase or decline by certain percentages after reaching a new high or low.
The euro has weakened 0.9 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The dollar fell 0.3 percent, and the yen dropped 4.6 percent. The so-called Aussie has declined 2.5 percent.
To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
