BLBG:Dollar Weakens Against Majors Before EU Summit; Aussie Advances
The dollar weakened against most of its major counterparts as Asian stocks rallied for a second day and European leaders gather for a summit in Brussels to stem the region’s debt crisis.
The Australian dollar climbed for a third day amid rekindled demand for higher-yielding assets. The 17-nation euro is poised for its biggest quarterly drop versus the yen since September amid concern the region’s fiscal woes are spreading to bigger economies. Italy will hold a debt auction today following sales in the past two days that saw borrowing costs increase.
“The markets are leaning toward risk-on as you see stocks trading higher,” said Junichi Ishikawa, an analyst in Tokyo at IG Markets Securities Ltd. “That’s leading to dollar weakness across the board.”
The dollar lost 0.4 percent to $1.2513 per euro as of 1:26 p.m. in Tokyo from the close in New York yesterday. It dropped 0.4 percent to 79.42 yen. The euro was little changed at 99.36 yen. The Australian dollar added 0.3 percent to $1.0114.
Since the end of March, Europe’s shared currency has fallen 10 percent versus the yen and 6.2 percent against the dollar. As the first half of the year nears its close, the dollar is up 3.2 percent in 2012 against the yen and 3.5 percent versus the euro.
The MSCI Asia Pacific Index of shares climbed 1 percent after the Standard & Poor’s 500 Index advanced 0.9 percent in New York yesterday.
EU Blueprint
EU leaders meet today and tomorrow for the 19th summit on the region’s debt crisis. They are due to discuss a plan seen playing out over more than a decade for closer European integration. The blueprint, written by European Council President Herman Van Rompuy, centers on common banking supervision and deposit insurance, along with a “criteria-based and phased” move toward joint debt issuance.
The blueprint also suggests the EU could impose upper limits on budgets and debt levels of nations that use the euro.
Investors “are still cautious about entering the weekend filled with risk-off positions in case positive news comes out” from the EU summit, said Satoshi Okagawa, a senior global- markets analyst at Sumitomo Mitsui Banking Corp. in Singapore. “The dollar is weak.”
German Chancellor Angela Merkel said on June 25 that euro bonds, euro bills and European deposit insurance with joint liability are “economically wrong and counterproductive.”
“The market expects very little from the summit. Merkel put a dampener” on talks of any shared debt responsibility, said Jesper Bargmann, regional head of spot trading for major currencies in Singapore at Royal Bank of Scotland Group Plc. “Whatever the outcome, I think euro is a sell.”
Italy’s Auctions
Italy is scheduled to sell 2.5 billion euros ($3.1 billion) of five-year notes and 3 billion euros of 10-year debt today. The 185-day bills sold yesterday got a rate of 2.957 percent, while the zero-coupon, two-year notes offered on June 26 yielded 4.712 percent. Both were the highest this year.
The nation’s 10-year yields climbed to a five-month high of 6.34 percent on June 14, nearing the 7 percent level that spurred Greece, Ireland and Portugal to seek bailouts.
An index of executive and consumer sentiment in the euro area probably fell to 89.6 this month, the lowest since October 2009 and down from 90.6 in May, according to the median estimate of economists in a Bloomberg News survey. The European Commission will release the figure today.
“People are looking for further weakness in the euro,” said Alex Sinton, director for institutional foreign exchange in Auckland at Australia & New Zealand Banking Group Ltd. (ANZ) “Growth there is waning.”
To contact the reporters on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net.
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.
