BLBG:Euro Set For Biggest 5-Day Drop In 2012 On Growth Concern
The euro headed for its biggest weekly decline this year as signs that Europe’s debt crisis is damping growth curbed demand for the currency.
The 17-nation euro has fallen versus all but one of its 16 major counterparts since May 18 before figures next week that may show consumer confidence in the currency bloc was little changed this month, while the jobless rate climbed in April to a 21-year high. The yen slid versus the dollar as Japan’s consumer-price gains remained far from the central bank’s target. The Dollar Index rose to a 20-month high as investors sought the relative safety of the U.S. currency.
“Europe’s economy is showing clear signs of a slowdown,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp. (8711), a currency margin company. “People can’t buy the euro even from the perspective of its fundamentals.”
The euro was little changed at $1.2537 as of 6:53 a.m. in London, after falling to $1.2516 yesterday, the least since July 6, 2010. It traded at 99.90 yen from 99.76 after dropping 0.2 percent yesterday. The yen slid 0.1 percent to 79.69 per dollar.
Europe’s shared currency is set for a 1.9 percent slide against the dollar this week, the biggest since the period ended Dec. 16. It has fallen 1.1 percent versus the yen.
The euro may weaken to the 2010 low of $1.1877 as early as next month, FX Prime’s Ueda said.
Confidence, Unemployment
A final reading will probably confirm that consumer confidence in the euro area was little changed at minus 19.3 in May from minus 19.9 in the previous month, according to the median estimate in a Bloomberg News survey before the figures are released May 30. The unemployment rate climbed to 11 percent in April, the highest in data compiled by Bloomberg going back to 1990, economist forecasts in a separate poll showed before the June 1 report.
In Italy, figures today may show retail sales declined 0.2 percent in March after rising 0.6 percent in the previous month.
A composite index based on a survey of purchasing managers in the services and manufacturing industries in the euro bloc fell to 45.9 in May from 46.7 in the previous month, according to a separate report yesterday by Markit Economics. A reading below 50 indicates contraction.
“Market sentiment is fragile and macro-fundamentals in the euro zone have yet to stabilize,” Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co. in New York, wrote in a report yesterday. “However, technical signals are stretched and the scope for a short covering rally remains in place.” A short position is a bet an asset will decline.
The single currency may see resistance above $1.27, Chandler wrote. Resistance is a level on a chart where sell orders may be clustered.
Japan Inflation
The yen fell as much as 0.3 percent versus the dollar as a report showed consumer prices in Japan, excluding fresh food, climbed 0.2 percent in April from a year earlier, remaining far from the Bank of Japan (8301)’s 1 percent inflation target after years of falling prices.
The BOJ set the price target in February. Officials refrained from adding monetary stimulus at a meeting this week.
“When concern rises about an economic slowdown, expectations for additional monetary easing by the BOJ are more likely to increase,” said Takuya Kawabata, a researcher at Gaitame.com Research Institute Ltd. in Tokyo, a unit of Japan’s largest currency-margin company. “Speculation of monetary easing is a selling catalyst for the yen.”
Best Performers
The euro has lost 4.9 percent in the past 12 months, according to Bloomberg Correlation-Weighted Indexes. The yen has risen 9.5 percent, the best performance among the 10 developed- nation currencies tracked by the gauge. The dollar was the second-biggest gainer, having advanced 7.8 percent.
The yen has been bought as a safe asset amid concerns about the euro, according to Japan’s Finance Minister Jun Azumi. Greek elections on June 17 are a focus, he told reporters today.
Greece is set to hold its second national vote in six weeks after anti-bailout party Syriza surged to second place in balloting on May 6.
“We want Greece to remain in the euro area while respecting its commitments,” European Union leaders said in a statement after a summit in Brussels this week, the 18th since Greece’s debt problems erupted. “We expect that after the elections, the new Greek government will make that choice.”
The Dollar Index (DXY), which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, climbed to as high as 82.411, the strongest level since September 2010.
The Australian and New Zealand dollars were set to complete four weeks of declines against their U.S. counterpart as Asian stocks fell, curbing demand for higher-yielding assets.
The so-called Aussie lost 0.2 percent to 97.42 U.S. cents, headed for a 1 percent drop this week. New Zealand’s currency was unchanged at 75.34 U.S. cents from yesterday and has fallen 0.4 percent since May 18.
The MSCI Asia Pacific Index (MXAP) of shares fell 0.6 percent today.
To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net
To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net
