BLBG:Euro Falls Versus Yen As Spain Selld Debt Before ECB
The euro fell for a second day versus the yen and the dollar as Spanish borrowing costs rose at a debt sale and amid speculation the European Central Bank will cut borrowing costs at a policy meeting today.
The pound maintained a three-day drop against the U.S. currency before a meeting at which economists say the Bank of England will extend its asset-purchase program. The yen strengthened against all 16 of its major peers as the Bank of Japan (8301) raised its economic evaluation of all regions for the first time in more than two years.
“The ECB didn’t signal it will cut rates this month, but given the situation has deteriorated substantially, I wouldn’t be surprised if it does,” said Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “Lower rates will reinforce the euro’s position as a funding currency of choice. It’s going to be negative for the euro.”
The shared currency fell 0.3 percent to 99.75 yen at 11:03 a.m. London time after losing 0.5 percent yesterday. It traded 0.1 percent weaker at $1.2509. The pound slipped 0.1 percent to $1.5573 after retreating 0.8 percent since June 29. The dollar declined 0.2 percent to 79.73 yen.
Spain sold 3 billion euros of bonds, the Bank of Spain said, meeting the maximum target for the sale. The Treasury sold its 10-year benchmark bond at an average yield of 6.43 percent, compared with 6.044 percent when the securities were last sold on June 7. It also sold debt maturing in July 2015 and October 2016.
The ECB will lower its main refinancing rate by a quarter- percentage point from a record low of 1 percent, according to the median estimate of 63 analysts in a Bloomberg News survey. Five economists predict a reduction to 0.5 percent, while 10 forecast no change.
Reports from Markit Economics showed this week that U.K. manufacturing and construction shrank in June with growth of services activity slowing, adding to the case for the Bank of England to increase stimulus. The central bank will probably raise its target for bond purchases by 50 billion pounds to 375 billion pounds, according to 30 of 41 economists in a Bloomberg News survey.
To contact the reporters on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net; David Goodman in London at dgoodman28@bloomberg.net.
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
