BLBG: Euro Near One-Week Low on Concern European Recession Deepening
The euro traded near a one-week low against the yen on speculation a German report will show the recession in Europe’s largest economy is deepening, backing the case for the region’s central bank to cut interest rates.
Australia’s dollar fell for a fifth day against the U.S. currency after a government report showed the jobless rate increased to the highest level in five years. The greenback gained versus 11 of the 16 most-traded currencies before a Commerce Department report today that may show the U.S. trade deficit remained at a six-year low in February, adding to signs the U.S. slump is easing.
“Worries are resurfacing over the economies in Europe,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “Downside pressure on the euro is likely to increase.”
The euro traded at 132.50 yen as of 1:02 p.m. in Tokyo from 132.48 yen in New York yesterday, when it reached 130.98, the lowest level since April 2. The 16-nation currency fell to $1.3265 from $1.3282, after touching $1.3148 yesterday, the weakest since March 30. The dollar traded at 99.86 yen from 99.83 yen.
Trading in currencies may be more subdued than usual today as the Easter holidays start tomorrow, Soma said.
Investors raised bets the European Central Bank will reduce rates in coming months. The yield on the three-month Euribor interest-rate futures contract for June delivery declined to 1.26 percent yesterday from 1.27 percent on April 7, according to data compiled by Bloomberg.
German industrial output fell a seasonally adjusted 3 percent in February, a sixth month of declines, according to a Bloomberg News survey before the Economy Ministry report today.
Machine Orders
Any gains in the yen may be tempered as stocks climbed after a Japanese report showed machinery orders unexpectedly rose, damping demand for the safety of the Japanese currency.
Japan’s Cabinet Office said machinery orders, an indicator of capital investment in the next three to six months, rose 1.4 percent in February. Economists forecast a drop of 6.9 percent, according to a Bloomberg survey.
“The data were much better than expected, easing concerns over Japan’s recession,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “This is why stocks are up and the yen is being sold.”
The MSCI Asia Pacific Index of regional shares advanced 2.2 percent and the Nikkei 225 Stock Average rose 2.5 percent.
Australia Dollar
The Australian dollar declined after the statistics bureau said the number of people employed dropped 34,700 in March from February. The median estimate of economists surveyed by Bloomberg was for a decline of 25,000. The jobless rate increased to 5.7 percent from 5.2 percent, the biggest increase in 18 years.
Australia’s dollar traded at 70.89 U.S. cents from 71.01 cents yesterday, when it reached 70.34 cents, the lowest level since April 2.
The Dollar Index may gain for a fourth day as concern eases that the recession in the world’s largest economy will worsen.
The U.S. trade shortfall will remain unchanged from the previous month at $36 billion in February, the least since October 2002, a Bloomberg survey showed. The Commerce Department will release the report at 8:30 a.m. in Washington.
“There’s a possibility that the U.S. economy is bottoming out, as policy makers’ measures are starting to work,” said Masashi Kurabe, head of currency sales and trading in Hong Kong at Bank of Tokyo-Mitsubishi UFJ Ltd. “This would be positive for the dollar.”
The Dollar Index, which the ICE uses to track the greenback versus the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, was 85.231 from 85.361 yesterday.
