BLBG:Euro Declines to 2-Week Low on Spain Growth Concern
The euro fell to the lowest level in two weeks after Spain’s central bank said gross domestic product fell at a “significant pace” in the third quarter, stoking concern the nation won’t be able to trim its deficit.
The 17-nation currency extended its longest streak of declines in more than six weeks against the dollar after the German, Dutch and Finnish governments said Europe’s rescue fund should assume a limited role in banking recapitalizations. The yen rose against all its major peers on concern global central- bank stimulus measures will struggle to revive growth, spurring demand for safer assets. Sweden’s krona weakened against the dollar after a report showed consumer confidence fell.
“The markets are reacting to the negative newsflow we’ve seen out of Spain, which destabilizes investor sentiment and pressures the euro,” said Jeremy Stretch, head of foreign- exchange strategy at Canadian Imperial Bank of Commerce in London. “The optimism we saw priced in to markets after action from central banks is waning.”
The euro fell 0.2 percent to $1.2868 at 11:24 a.m. London time after earlier touching $1.2847, the least since Sept. 12. Europe’s shared currency dropped 0.4 percent to 99.96 yen. It slid to 99.71 yen, the weakest since Sept. 13. The yen added 0.2 percent to 77.68 per dollar after reaching 77.59, the strongest since Sept. 14.
The shared currency appreciated for a third day against the dollar, the longest streak since the four days ended Aug. 10.
Budget Goals
The euro may continue to decline toward $1.2740, Stretch said, should it break below a key support level at the 200-day moving average, which is currently at $1.2827, according to data compiled by Bloomberg. Support levels indicate an area where orders to buy may be clustered.
Spanish government bonds fell, with the yield on the 10- year bond rising 27 basis points to 6.01 percent.
Spain pledged to meet its budget goals even as data released yesterday showed government spending through August rose from a year ago and tax receipts fell. Catalan President Artur Mas called early elections for Nov. 25, as Prime Minister Mariano Rajoy struggles to gain acceptance for austerity measures and stokes frustration in Germany over his foot- dragging on whether to seek a bailout. Rajoy is due to speak at the Americas Society today at 1 p.m. in New York.
French household sentiment dropped to 85 in September from 86 in August, national statistics Insee said today in a release from Paris. Economists had expected a reading of 86, according to the median of 13 estimates gathered by Bloomberg News.
‘Weak’ Economy
“Recent data suggest that the European economy is likely to remain weak for a long time,” said Hitoshi Asaoka, a senior strategist at Mizuho Trust & Banking Co. in Tokyo. “We’re not sure whether Spain is really going to ask for a bailout” and that’s weighing on the euro, he said.
The euro has still advanced 2.3 percent against the dollar this month and 1.3 percent versus the yen amid optimism policy makers are working toward a solution for the debt crisis and after the Federal Open Market Committee said on Sept. 13 that it will buy mortgage-backed securities at a pace of $40 billion per month until the labor market improves.
Bank recapitalization “should take place based on an approach that adheres to the basic order of first using private capital, then national public capital and only as a last resort the ESM,” Wolfgang Schaeuble, Jan Kees de Jager and Jutta Urpilainen said yesterday in a joint statement distributed by the Finnish Finance Ministry.
‘Lower’ Euro
“There’s concern that European authorities may be going back on their word to help recapitalize the Spanish banking system,” said Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “We could see the euro correct even lower after its recent good run.”
The euro weakened 3.6 percent in the past six months, the worst performance after the Swiss franc among the 10 developed- nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen was the biggest gainer, rising 8 percent. The dollar added 0.6 percent.
Sweden’s krona dropped against the dollar after a report showed consumer confidence in the nation fell more than economists predicted this month.
The krona slid 0.6 percent to 6.7169 per dollar and fell 0.3 percent to 8.4998 per euro.
The consumer confidence index fell to 2 from 5.4 in August, the Stockholm-based National Institute of Economic Research said today. Economists predicted confidence would fall to 5, according to the median of 11 forecasts in a Bloomberg survey.
To contact the reporters on this story: Emma Charlton in London at echarlton1@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net.
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net.
