BLBG:Euro Drops Versus Peers On Signs Crisis Damping Sentiment
The yen weakened the most in a month against the dollar after Fitch Ratings cut Japan’s credit ranking, saying the nation isn’t acting quickly enough to tackle its public debt burden.
Japan’s currency fell versus all except one of its 16 major peers as the central bank started a two-day meeting amid speculation it will boost stimulus measures to spur flagging growth. The euro dropped toward a four-month low against the greenback after the Organization for Economic Cooperation and Development said Europe’s debt crisis risks spiraling. The pound weakened as the International Monetary Fund said the U.K. needs more monetary easing.
“The market is putting the yen under pressure after the Fitch decision,” said Ian Stannard, head of Europe currency strategy at Morgan Stanley in London. “We do not believe that the rebound in the dollar against the yen is sustainable and we think it offers a new selling opportunity. The yen will remain strong despite this news today because of the uncertain global environment.”
The yen weakened 0.6 percent to 79.75 per dollar at 7:04 a.m. in New York after falling as much as 0.7 percent, the most since April 18. Japan’s currency declined 0.1 percent to 101.74 per euro. The euro depreciated 0.5 percent to $1.2758. It slid to $1.2642 on May 18, the weakest level since Jan. 16.
Fitch lowered Japan’s long-term, foreign-currency ranking to A+ from AA, and cut the local-currency grade to A+ from AA-, the company said in a statement. The outlooks on both are negative, it said.
‘Looks Leisurely’
“The country’s fiscal consolidation plan looks leisurely relative even to other fiscally-challenged, high-income countries,” said Andrew Colquhoun, head of Asia-Pacific Sovereigns at Fitch in Hong Kong.
The yen has declined 2.8 percent this year, the worst performer among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar appreciated 1.1 percent, and the euro weakened 0.7 percent.
Japanese Finance Minister Jun Azumi told reporters today he expects the Bank of Japan (8301) to take appropriate steps in a timely manner. He said he regards highly the steps taken by the central bank since February. The BOJ expanded its asset-purchase program in February and April.
Euro Weakens
The euro fell for the first time in three days against the dollar after the OECD said there was a danger Europe’s debt crisis will seriously damaged the world economy as it revised down its forecasts for the 17-nation currency bloc.
Gross domestic product in the euro region will shrink 0.1 percent this year and expand 0.9 percent in 2013 instead of posting growth of 0.2 percent and 1.4 percent as predicted last November, the Paris-based organization said.
German Chancellor Angela Merkel said yesterday she won’t shy away from disagreeing with French President Francois Hollande at the European Union summit beginning tomorrow in Brussels. Good cooperation “doesn’t exclude differing positions,” Merkel said in Chicago during a meeting of the North Atlantic Treaty Organization.
“Markets are waiting to see what’s going to come out of the leaders’ summit,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “There are a number of concerns regarding the crisis and the debate between France and Germany. That’s weighing on confidence and sentiment and the euro.”
‘Detrimental’
The euro has declined 3.7 percent against the dollar this month amid concern Greece will leave the single currency bloc after voters flocked to anti-bailout parties at inconclusive elections held on May 6.
Technical conditions for the euro are “detrimental,” Ralf Umlauf, an analyst at Helaba Landesbank Hessen-Thueringen in Frankfurt, wrote in a note to investors. “We therefore still see scope for a test of the annual low,” he wrote. The euro fell to $1.2624 on Jan. 13, the weakest this year, according to data compiled by Bloomberg.
The pound snapped a two-day gain versus the dollar as the IMF said more stimulus such as quantitative easing was needed to boost the economy.
Sterling slid against 10 of its 16 most-traded peers after a government report showed inflation slowed in April more than economists forecast.
“It looks like a line hasn’t been drawn under QE and today’s inflation figures will slow down sterling’s recent surge,” said Lee McDarby, head of dealing on the corporate and institutional treasury desk at Investec Bank Plc in London.
The pound fell 0.4 percent to $1.5772 after dropping to $1.5733 on May 18, the lowest level since March 16.
Norway’s krone rose for a second day against the euro after a report showed the economy expanded more than analysts forecast in the first quarter.
Gross domestic product, excluding oil, gas and shipping output, grew 1.1 percent, after a revised 0.8 percent expansion in the period through December, Statistics Norway said. Growth was forecast at 0.9 percent, according to a Bloomberg survey.
The krone appreciated 0.6 percent to 7.5678 per euro after rising 0.2 percent yesterday.
To contact the reporters on this story: Emma Charlton in London at echarlton1@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
