BLBG:Euro Weakens Before Leaders Meet To Discuss Greece; Aussie Drops
The euro fell for the first time in five days against the dollar as Greek Prime Minister Antonis Samaras prepared to meet with his German and French counterparts to ask for more time to meet economic targets.
The 17-nation currency pared the biggest weekly gain versus the greenback since February after a German lawmaker said Europe’s largest economy can’t make more money available for Greece. Samaras will meet German Chancellor Angela Merkel today and French President Francois Hollande tomorrow. Australia’s dollar weakened after Reserve Bank Governor Glenn Stevens said the currency would probably fall if a mining boom ends.
“It wouldn’t be surprising if the euro goes lower, particularly given that Merkel and Hollande and other German officials have been very clear that they see absolutely no leeway whatsoever,” said Neil Mellor, a foreign-exchange strategist at Bank of New York Mellon Corp. in London. A Greek exit from the euro is “a very real prospect and of course that inevitably is going to limit any dollar short position.” A short position is a bet an asset will fall.
The euro dropped 0.2 percent to $1.2535 at 10:49 a.m. London time, trimming its weekly advance to 1.7 percent. The common currency climbed to $1.2590 yesterday, the strongest level since July 4. The euro dropped 0.1 percent to 98.52 yen. The dollar strengthened 0.1 percent to 78.56 yen.
Germany can’t extend funding for Greece and the cash- strapped nation’s exit from the currency union would “not be a problem for the euro,” Volker Kauder, the parliamentary caucus leader for Merkel’s Christian Democratic Union, said today on ZDF public television.
Maintain Pressure
Merkel said Germany and France will keep pressure on Greece to overhaul its economy when she meets Samara, who is seeking more time to fix his debt-ravaged country.
“We, and I, will encourage Greece to pursue the path of reform that demands a lot from the people,” Merkel said late yesterday before hosting Hollande for a working dinner in Berlin to coordinate positions on Greece. Merkel receives Samaras at the Chancellery today and a joint news conference is scheduled for about 1 p.m. Berlin time.
The dollar strengthened against all but two of 16 major counterparts as a decline in stocks boosted demand for safer assets. The MSCI Asia Pacific Index of stocks dropped 1.2 percent, and the Stoxx Europe 600 Index fell 0.1 percent.
The greenback tends to strengthen at times of risk aversion due to its role as the world’s reserve currency.
Australian Dollar
Australia’s dollar declined for a second day against the U.S. currency as Stevens said in testimony to a parliamentary panel that the nation’s resource investment boom will peak “within the next year or two.”
“Sentiment is still being influenced to some extent by all of these negative news reports regarding the resources sector,” said Ray Attrill, global co-head of foreign-exchange strategy at National Australia Bank Ltd. in Sydney. He said he was “moderately bearish” on the Australian dollar.
The so-called Aussie dropped 0.4 percent to $1.0402 after depreciating 0.6 percent yesterday.
Australia’s dollar fell below a support area at $1.0411 to $1.0413, meaning it “will likely have strong bearish implications going forward,” Skandinaviska Enskilda Banken AB analysts Anders Soderberg and Dag Muller wrote in a research note. Support is an area where buy orders may be clustered.
The pound depreciated for a second day against the dollar after a government report showed the U.K. economy contracted in the second quarter.
Gross domestic product shrank 0.5 percent, compared with a 0.7 percent decline estimated on July 25, the Office for National Statistics said in London.
Sterling weakened 0.1 percent to $1.5849, and was little changed at 79.12 pence per euro.
To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net
To contact the editors responsible for this story: Daniel Tilles at dtilles@bloomberg.net
