SF: Euro Falls to Eight-Week Low on Greece Aid Concern; Pound Drops
Nov. 5 (Bloomberg) -- The euro fell to the lowest in almost eight weeks against the dollar amid concern Greece will struggle to win bailout funds, risking the nation’s future in the European currency bloc.
The 17-nation euro declined versus all its 16 major counterparts after Greek Prime Minister Antonis Samaras pledged yesterday that proposed wage and pension cuts will be the last, with the plan due to face parliamentary approval as early as this week. The Dollar Index rose to the highest in almost two months before tomorrow’s U.S. presidential election. The pound fell for a second day against the dollar after U.K. services growth slowed.
“It’s all negatives just lined up” for the euro, said Neil Mellor, a foreign-exchange strategist at Bank of New York Mellon Corp. in London. “It’s not clear how the vote is going to go and I’m not convinced that should the vote be carried, it would be positive for Greece and the euro zone.”
The euro weakened 0.3 percent to $1.2795 at 10:47 a.m. in London after dropping to $1.2778, the lowest level since Sept. 11. The common currency declined 0.6 percent to 102.67 yen. The yen appreciated 0.2 percent to 80.25 per dollar.
A further decline in the euro to $1.2730 is “likely,” Bank of New York’s Mellor said.
Samaras, speaking to lawmakers of his New Democracy Party in Athens, said Greek society won’t tolerate any more austerity measures. The first parliamentary vote on measures needed to obtain additional aid is scheduled to take place as early as Nov. 7. As Samaras delivered his warning, he urged lawmakers to cast their votes with the nation in mind.
‘Losing Confidence’
“The market is increasingly losing confidence that Greece might get its extended bailout money because the governing coalition is unraveling or disagreeing more and more,” said Imre Speizer, an Auckland-based strategist at Westpac Banking Corp. “We’ve seen the euro fall and it looks like it wants to go lower.”
The euro has weakened 3 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The yen has dropped 6.1 percent, the worst performer, and the dollar declined 1.6 percent.
The U.S. currency rose against 13 of its 16 major peers today on speculation the winner of this week’s election will press ahead with plans to curtail the nation’s deficit.
‘Too Big’
Employment and the economy are central themes before tomorrow’s election, with President Barack Obama and Republican nominee Mitt Romney each trying to convince voters he can best energize the economic expansion.
“The U.S. election is becoming a positive for the dollar,” said Mellor. “The deficit is too big for any flexibility on either side. It’s got to be reduced, so that’s out of the equation.”
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against currencies of six U.S. trading partners, gained 0.2 percent to 80.72. The gauge rose above its 200-day moving average, currently at 80.67, for the first time since Sept. 7.
The pound declined for a second day versus the dollar after an industry report showed U.K. services growth slowed more in October than economists forecast.
Sterling fell before the Bank of England holds a two-day meeting this week to decide whether to increase monetary stimulus through so-called quantitative easing, to boost growth.
“The U.K data seems to have knocked sterling this morning but I’d be wary of further weakness,” said Michael Derks, chief strategist at FXPro Group Ltd. in London. “The hurdle for more QE is reasonably high.”
The U.K. currency weakened 0.3 percent to $1.5978 after falling to $1.5962, the lowest since Oct. 24. The pound was little changed at 80.08 pence per euro.
-- With assistance from Neal Armstrong in London, Mariko Ishikawa in Tokyo and Kristine Aquino in Singapore. Editors: Nicholas Reynolds, Paul Dobson
To contact the reporters on this story: Lucy Meakin in London at lmeakin1@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
