BLBG:Euro Drops To 11-Year Low Versus Yen Before Spain Auction
The euro touched the lowest level in more than 11 years against the yen as concern escalated that Europe’s debt crisis is deepening.
The 17-nation currency continued its decline against the dollar into a fourth day as a surge in Spain’s 10-year note yields toward a euro-era record last week dimmed the outlook for a bill sale tomorrow. The yen and dollar strengthened against most of their major peers on increased demand for a haven as Greece’s creditors assess the country’s progress in meeting its bailout targets.
“The euro is never running out of catalysts to sell,” said Kengo Suzuki, a foreign-exchange strategist in Tokyo at Mizuho Securities Co., a unit of Japan’s third-largest bank by market value. “The yen is expected to remain strong among the major currencies as the least bad choice.”
The common currency touched 94.63 yen, the lowest since November 2000, and traded at 94.67 as of 12:51 p.m. in Tokyo, 0.8 percent lower than the close in New York on July 20. It declined 0.4 percent to $1.2113 after sliding to as low as $1.2106, a level unseen since June 2010. The yen climbed 0.4 percent to 78.15 per dollar.
Spain, the euro region’s fourth-biggest economy, will auction bills tomorrow maturing in three and six months. The nation’s benchmark 10-year yield climbed to 7.284 percent on July 20, almost matching the euro-era record 7.285 percent reached a month ago.
Spanish Regions
Spanish regions face about 15 billion euros ($18 billion) of debt redemptions in the second half of this year, with Catalonia and Valencia being the most indebted states. Catalonia will decide whether to tap the emergency-loan fund, said a spokeswoman, who asked not to be named citing government policy.
The country last month sought loans of as much as 100 billion euros from the European Financial Stability Facility to recapitalize its banks battered by the collapse of the property boom in 2008. It created the state-guaranteed fund that regions can turn to in order to repay debt in exchange for further budget cuts.
Greece’s troika of international creditors -- the European Commission, the European Central Bank and the International Monetary Fund -- will arrive in Athens tomorrow amid doubts the country will meet its commitments and reluctance among euro-area states to put up more funds should it fail.
“If Greece doesn’t fulfill those conditions, then there can be no more payments,” German Vice Chancellor Philipp Roesler told broadcaster ARD yesterday.
Stop Paying
The IMF will stop paying rescue aid to Greece as it is already clear the nation will not be able to fulfill its promise to cut debt to 120 percent of annual economic growth in euro terms by 2020, Der Spiegel said, citing unidentified European Union officials.
An index of consumer sentiment in the euro region probably fell to minus 20 in July from minus 19.8 a month earlier, economists surveyed by Bloomberg News predict before today’s data. The gauge slid to minus 21.3 in December, the lowest level since August 2009.
The yen has climbed 8.6 percent over the past three months versus nine developed-nation counterparts tracked by Bloomberg Correlation-Weighted Indexes, the best performance. The euro has slumped 5 percent, while the dollar has risen 4.1 percent.
U.S. Economy
Gains in the greenback were limited before data that economists say will show U.S. economic growth slowed, fanning speculation the Federal Reserve will ease monetary policy further, debasing the currency.
Gross domestic product expanded at a 1.4 percent annual rate in the second quarter, the slowest pace in a year, according to the median estimate of economists surveyed by Bloomberg News. The economy grew 1.9 percent in the first three month of this year. The Commerce Department will release the figures on July 27.
Fed Chairman Ben S. Bernanke said last week that policy makers are “looking for ways to address the weakness in the economy should more action be needed to promote a sustained recovery in the labor market.” The Fed will hold a two-day policy meeting starting July 31.
“If the data flow adds to the market’s expectations that the Fed could do something as early as August 1, then that is going to be a counter to safe haven flows that would support the U.S. dollar,” said Ray Attrill, global co-head of foreign- exchange strategy at National Australia Bank Ltd. (NAB) in Sydney. In that situation, “you’d probably say that the yen is going to be the strongest” among the major currencies.
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
