BLBG:Euro Falls to 3-Month Low on Greece; Aussie Breaches pari
The euro dropped 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 slid for a second day versus the yen after Greece’s biggest anti-bailout party defied overtures to join the government. The euro also weakened after euro-area industrial production unexpectedly declined in March. The Dollar Index (DXY) rose for an 11th day and the yen gained as the debt crisis boosted demand for safer assets. Australia’s currency fell below parity with the greenback for the first time this year.
“Greek political tension is adding further pressure on the currency,” said Henrik Gullberg, a foreign-exchange strategist at Deutsche Bank AG in London. “If they opt for another election, the market is going to see it as a referendum whether the country would like to remain in the euro zone or not.”
The euro fell 0.4 percent to $1.2870 at 7:23 a.m. in New York after sliding to $1.2861, the weakest level since Jan. 23. The currency dropped 0.5 percent to 102.74 yen. It declined to 102.66, the lowest since Feb. 16. The yen gained 0.1 percent to 79.83 per dollar.
Alexis Tsipras, who heads Greece’s anti-bailout Syriza party, won’t attend a meeting called by President Karolos Papoulias today, the Athens-based party said in a statement. Syriza 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 stalemate 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.
The euro also weakened after the European Union’s statistics office said industrial production in the region contracted in March. Output slipped 0.3 percent from February, when it advanced 0.8 percent. Economists forecast a gain of 0.4 percent, a Bloomberg News survey showed.
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.
Futures Traders
Futures traders increased bets the euro will decline against the dollar. The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain -- so-called net shorts -- was 143,984 on May 8, compared with net shorts of 106,990 a week earlier, data from the Washington-based Commodity Futures Trading Commission showed.
Australia’s dollar dropped below parity with its U.S. counterpart as concern that Greece will leave the euro bloc damped 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 0.4 percent to 99.82 U.S. cents after dropping to 99.63 U.S. cents, the lowest since Dec. 20. New Zealand’s currency slid 0.7 percent to 77.76 U.S. cents.
Dollar Index
The Dollar Index extended its 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. trading partners, rose 0.3 percent to 80.519.
Haven currencies such as the greenback “are very much in vogue,” said Mike Jones, a currency strategist at Bank of New Zealand in Wellington. “There’s some good reasons at the moment to buy the dollar.”
The Swedish krona fell 0.8 percent to 7.0102 per dollar, weakening through 7 for the first time since Jan. 16.
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 4 percent in the past six months, the worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 2.3 percent, the yen dropped 1.5 percent, and the Aussie declined 0.2 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
