BLBG:Euro Falls as Greek Leaders Struggle to Form Coalition
The euro fell, extending its longest losing streak in 3 1/2 years, as Greek politicians struggle to form a new government, raising concern that the nation may leave the currency bloc.
The 17-nation euro traded 0.2 percent from an almost three- month low versus the yen before Alexis Tsipras of Greece’s Syriza party is due to meet today with leaders of New Democracy and Pasok, the two parties that supported austerity measures. Australia’s dollar fell after Prime Minister Julia Gillard said returning a budget surplus gives the central bank “maximum room” to move on interest rates. Demand for the U.S. currency and yen was buoyed as Asian stocks dropped.
“If Greece exits the euro bloc, it will be their own decision, which may come if we see the change of leaders there,” said Thomas Averill, managing director in Sydney at Rochford Capital, a currency and interest-rate risk-management company. “Euro is going to be under pressure for some time.”
The euro slid 0.2 percent to $1.2975 at 6:47 a.m. in London from yesterday’s close in New York. It touched $1.2955 on May 7, the weakest level since Jan. 25. The seven-day slump through yesterday was the longest stretch of declines since September 2008. The common currency lost 0.4 percent to 103.44 yen, after falling to 103.24 on May 7, the lowest since Feb. 16. Japan’s currency bought 79.72 per dollar from 79.87.
Averill expects the euro to drop to $1.26 by the end of this month.
Global Stock Declines
The MSCI Asia Pacific Index of stocks retreated 1.2 percent. The Standard & Poor’s 500 Index (SPX) lost 0.4 percent yesterday, while the MSCI World Index slid 0.8 percent.
Tsipras, whose Syriza party placed second in Greek elections on May 6, said he would forge ahead with plans to form a coalition government of left-wing parties after he was handed the mandate by President Karolos Papoulias.
Antonis Samaras of New Democracy and Evangelos Venizelos, the former finance minister who leads Pasok, rejected an ultimatum from Tsipras to send a letter to the European Union revoking their written pledges to implement austerity measures by the time he meets them today. Another election may be held in mid-June if politicians fail to form a governing coalition.
Greece could exit the euro bloc as soon as next month, according to John Taylor, founder and chief executive officer of hedge fund FX Concepts LLC in New York.
‘Out of Money’
“This summer, I think, is very likely,” Taylor said in an interview with Erik Schatzker and Sara Eisen on Bloomberg Television’s “InsideTrack” yesterday. “The Europeans aren’t going to give them the money, the International Monetary Fund isn’t going to give them an OK. They’ll be out of money in June.”
The euro has weakened 3.6 percent over the past six months, the worst performance of the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 1.1 percent, and the yen dropped 1.6 percent.
Investors should sell the euro at $1.3075, targeting $1.2850 with a stop-loss order at $1.3165, UBS AG said, citing trading patterns. A stop loss is a preset instruction to exit a trade at a certain level in case a bet goes the wrong way.
The euro may fall to the January low of $1.2628 should the currency break below the 62 percent retracement of the January- to-March advance at $1.2954, Richard Adcock, head of fixed- income technical strategy in London, wrote in a note yesterday.
‘Sluggish’ Global Economy
The greenback and yen gained against most of their major peers today as concern that a recovery in the global economy is losing momentum bolstered demand for safer assets.
Exports from Germany, Europe’s biggest economy, probably decreased 0.5 percent in March from the previous month, when they rose 1.5 percent, according to the median forecast of economists in a Bloomberg News survey before the statistics office releases the figures today. U.S. initial jobless claims may have risen by 4,000 to 369,000 in the week ended May 5 from the prior period, another poll showed ahead of tomorrow’s data.
“The whole global economy is sluggish and we expect that to remain the case,” said Rochford’s Averill. “I think there is still some short-term gain for safe-haven currencies” such as the dollar and yen.
The so-called Aussie fell for a second day versus its U.S. counterpart after Gillard said the budget for the fiscal year starting July 1 supports the Reserve Bank of Australia when it moves on interest rates.
With growth in the nation returning to trend it was the right time to end four years of fiscal deficits, Gillard said in an interview in Canberra today after delivering a A$1.54 billion ($1.55 billion) surplus forecast for 2012-13.
“What we can do as a government is to get fiscal policy in the right shape to give the Reserve Bank the maximum room to move should they choose to do so,” Gillard said.
Australia’s dollar weakened 0.5 percent to $1.0067 after touching $1.0053, the least since Dec. 29.
To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
