BLBG:Euro Falls Most in 2 Months on Growth Concern; Yen Gains
The euro dropped the most in two months against the dollar as an index of services and manufacturing in the region shrank to a three-year low.
The 17-nation currency declined for a third day versus the yen as the data added to evidence the debt crisis is sapping growth in the euro area. The yen and the dollar strengthened against most of their major counterparts after separate reports showed China’s manufacturing and Japanese exports declined, spurring demand for assets perceived as safer. Australia’s dollar and South Africa’s rand led losses among higher-yielding currencies.
“One of the big problems that remains unresolved in the euro area is a lack of growth,” said Lee Hardman, a foreign- exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “We still anticipate the euro will continue to weaken and expect a move back to $1.20 over the next six to 12 months.”
The euro dropped 0.8 percent to $1.2943 at 11:03 a.m. London time, after sliding 0.9 percent, the biggest decline since July 20. The shared currency weakened 1.1 percent to 101.16 yen and declined for a fourth day versus the Swiss franc, depreciating 0.1 percent to 1.2086 francs. The yen strengthened 0.3 percent to 78.15 per dollar.
A composite index based on a survey of purchasing managers in euro-area services and manufacturing industries dropped to 45.9 for September, the lowest since June 2009, London-based Markit Economics said in an initial estimate. A reading below 50 indicates contraction.
‘Get Worse’
“At these levels, euro is a sell” because of the state of the European economy, said Joseph Capurso, a strategist at Commonwealth Bank of Australia in Sydney. “The economy is going to get worse before it gets better in Europe.”
The euro weakened against all but three of it 16 major peers even after Spain’s borrowing costs fell at a 4.8 billion- euro auction of three- and 10-year debt, the biggest since January. The sale came amid expectations the nation will ask the European Central Bank to buy its debt.
The euro has risen 2.8 percent in the past month, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar fell 2.5 percent and the yen weakened 0.7 percent.
The shared currency may extend gains by more than 4 percent, according to Richard Adcock, a technical analyst at UBS AG (UBSN) in London, who recommends buying the euro at around $1.2975 with a target of $1.3475 and a stop-loss at $1.2850.
Dollar Index
The Dollar Index (DXY) advanced for the third time in four days after the data from China and Japan added to evidence that Asian economies are slowing.
A preliminary reading was 47.8 for a China purchasing managers’ index released today by HSBC Holdings Plc (HSBA) and Markit Economics, compared with a final level of 47.6 last month. Japan’s overseas shipments slid 5.8 percent on weakness in demand from Europe and China.
The Dollar Index, which IntercontinentalExchange Inc. (ICE) uses to track the greenback against the currencies of six U.S. trading partners, rose 0.6 percent to 79.55.
Australia’s currency fell as the Chinese data clouded the prospects for the South Pacific nation’s resource exports.
“The market was probably expecting a bit more of a bounce” in the Chinese data, said Emma Lawson, a currency strategist at National Australia Bank Ltd. (NAB) in Sydney. “The Aussie is a little bit lower. There’s just a little bit of disappointment there.”
The so-called Aussie dropped 0.9 percent to $1.0391. South Africa’s rand also declined 0.9 percent, to 8.3463 per dollar.
To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net; Neal Armstrong in London at narmstrong8@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
