BLBG:Euro at 3-Month Low as Greek Concerns Weigh on Debt Sales
The euro rose from a three-month low against the dollar on optimism Greece’s political leaders will reach an agreement on forming a new government that will keep the country in the single-currency union.
The 17-nation currency erased losses against the yen as Antonis Samaras, leader of Greece’s New Democracy Party, said four parties have vowed to remain in the euro if they form part of the next administration. Euro gains may be limited after the European Commission forecast the region’s economy will contract this year. The dollar and yen rose against most of their 16 major peers after JPMorgan Chase & Co. said it made a surprise $2 billion trading loss, boosting demand for safer assets.
“The latest development may provide some support for the euro, but the impact is likely to be limited,” said Jane Foley, a senior currency strategist at Rabobank International in London. “There’s still a huge amount of uncertainty in the euro region, and Greece remains closer to an exit than it has ever been.”
The euro was little changed at $1.2944 at 11:44 a.m. London time after falling to $1.2905, the weakest level since Jan. 23. The shared currency gained 0.1 percent to 103.50 yen after dropping as much as 0.4 percent. The dollar was little changed at 79.96 yen.
Greece’s political impasse following an inconclusive May 6 election has raised the possibility that another ballot will have to be held as early as next month, threatening the implementation of austerity pledges. The standoff has reignited European concerns over Greece’s ability to hold to the terms of its two bailouts negotiated since May 2010 and stoked speculation it will have to leave the currency union.
Euro Membership
Samaras said today his sole condition for supporting a coalition government was that it guaranteed Greece’s membership of the euro area. “It would be suicide to isolate Greece now that conditions are changing in Europe,” he said in comments to his party’s lawmakers, televised live on state-run NET TV.
The shared currency declined 3.9 percent in the past six months, making it the worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes.
Gross domestic product in the euro area will drop 0.3 percent this year, the European Commission said, reiterating a February forecast. Greece will have the deepest contraction, with GDP shrinking 4.7 percent, while the economies of Spain and Italy are seen falling 1.8 percent and 1.4 percent, respectively.
Italian Bills
The euro rose against the pound as Italy sold 10 billion euros of Treasury bills, meeting its target for the auction as rates fell from the previous sale. The euro strengthened 0.3 percent to 80.37 pence, its first gain in six days.
The Rome-based Treasury sold 7 billion euros of 364-day bills at 2.34 percent, down from 2.84 percent at the last sale of similar-maturity debt on April 11. Investors bid for 1.79 times the amount offered, up from 1.52 times last month. Investors also bought 3 billion euros of three-month bills at 0.865 percent, compared with 1.249 last month.
The pound fell against the dollar, extending a second weekly decline, after an industry report showed U.K. consumer confidence dropped last month as the economy slipped into a double-dip recession.
Sterling weakened versus most of its major peers as signs economic outlook is worsening raised the prospect that Governor Mervyn King will hint at resuming bond purchases, or quantitative easing, when the central bank releases its Inflation Report next week.
Pound Slides
The pound dropped 0.3 percent to $1.6100, headed for a weekly loss of 0.3 percent.
Australia’s dollar, known as the Aussie, slid against most of its major counterparts on concern a slowdown in China’s economy will reduce demand for commodity exports.
China’s industrial production rose 9.3 percent in April from a year earlier, the National Bureau of Statistics said today, compared with the 12.2 percent gain projected by economists. Retail sales increased 14.1 percent last month, while economists had forecast a 15.1 percent increase. China is Australia’s biggest trading partner.
The Aussie dropped 0.4 percent to $1.0044.
To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net.
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
