BLBG: Crude Oil Is Little Changed on Concern Fuel Demand May Decline
The euro fell against the dollar and extended a weekly loss versus the yen as the economy of the 16- nation region contracted the most in at least 13 years, raising concern the pace of recovery will be slow.
The U.S. currency pared its loss against the yen as manufacturing in the New York region contracted this month the least since August and the six-month outlook improved for a third straight month. The euro was headed for its first weekly decline versus the dollar in a month on Europe’s contraction.
“It’s a really bad piece of data, and it’s going to get worse because the European Central Bank has only come up with half-hearted measures,” said Geoffrey Yu, a strategist in London at UBS AG, the world’s second-largest currency trader. “This is going to be bad for the euro.”
The euro slid 0.5 percent to $1.3573 at 10:15 a.m. in New York, from $1.3639 yesterday, and was headed for a weekly decrease of 0.4 percent. The euro lost 1.1 percent to 129.27 yen from 130.67, for a 3.5 percent decline this week. The dollar dropped 0.6 percent to 95.25 yen, from 95.80, after earlier decreasing 1.1 percent.
The yen gained this week versus all of the 16 most actively traded currencies tracked by Bloomberg as reports indicating the global economic recovery may be slow reduced demand for higher- yielding assets. The yen rallied 7.6 percent to 11.06 against the South African rand and increased 5.7 percent to 14.70 versus Norway’s krone.
Europe’s Contraction
Gross domestic product of the nations that use the euro contracted 2.5 percent in the first quarter after decreasing 1.6 percent in the previous quarter, the European Union’s statistics office said today in Luxembourg. It’s the biggest drop since the beginning of euro-area GDP data in 1995 and exceeded the 2 percent reduction forecast in a Bloomberg survey of economists.
“The trend for the global economy is still likely to be downward,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “Investors remain risk-averse. The dollar and the yen will probably be bought.”
The Federal Reserve Bank of New York’s general economic index increased in May to minus 4.6 from minus 14.7 in the prior month, the bank said today. Readings below zero for the Empire State index signal manufacturing is shrinking.
China’s retail sales grew 14.8 percent last month from a year earlier, more than economists’ median forecast of a 14.5 percent increase and following March’s 14.7 percent gain.
‘Green Shoots’
“The green shoots have been most evident in the U.S. and China,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. “If the green shoots in the U.S. and China hold up for a couple of months, then after a long lag Europe will probably come back.”
The Dollar Index, used by the ICE to track the U.S. currency versus the euro, yen, pound, Swiss franc, Canadian dollar and Swedish krona, rose 0.3 percent to 82.644 from 82.388 yesterday and 82.529 at the end of last week.
International demand for long-term U.S. financial assets rose in March as China added to its portfolio of Treasury securities, according to government data.
Total net purchases of long-term equities, notes and bonds rose a net $55.8 billion, compared with buying of $22 billion in February, the Treasury said today in Washington.
The euro also fell this week as ECB policy makers clashed over the bank’s asset-buying program and the prospects for a recovery. Vice President Lucas Papademos said yesterday a recovery may come sooner than previously thought. Nout Wellink, a Dutch council member, said today economists shouldn’t be too optimistic. An Austrian council member, Ewald Nowotny, said today there is “no divergence in views of central bankers.”
ECB’s Rate
The ECB cut its benchmark interest rate to a record 1 percent on May 7 and announced a plan to buy 60 billion euros ($81.8 billion) in covered bonds to loosen credit markets.
New Zealand’s dollar fell 0.9 percent to 59.15 U.S. cents and was headed for a 2 percent weekly drop after the statistics office said retail sales declined for a record sixth quarter, dropping 2.9 percent, adjusted for inflation, from the previous three months. The median forecast of economists surveyed by Bloomberg was for a 1.5 percent decline.
The currency, which gained 20 percent against the dollar since the start of March, is an “accident waiting to happen,” Greg Gibbs, a foreign-exchange strategist in Sydney at RBS Group Australia Ltd., wrote in a report today.
“We’re forecasting a fall in the New Zealand dollar in the second half of the year, as the global recovery proves protracted and slow,” Gibbs said. “We expect risk appetite to take a step down from its recent recovery.”
