BLBG:Euro Rises As Greek Pro-Bailout Party Leads Opinion Polls
The dollar fell against all bar one of its 16 major peers after opinion polls in Greece showed voters warming to parties supporting the European Union’s bailout, easing concern the country will exit the currency bloc.
The 17-nation euro rebounded from the lowest since July 2010 after data showed trader bets on a decline in the euro reached a record high. The yen gained for the first time in three days against the dollar after minutes of the Bank of Japan (8301)’s April 27 meeting damped speculation the bank will boost monetary easing to achieve its 1 percent inflation goal.
“Any sign that anti-austerity parties are running out of steam could trigger some unwinding of euro shorts,” Junichi Ishikawa, an analyst in Tokyo at IG Markets Securities Ltd., said of the Greek opinion polls. “The bias is for the dollar to be sold in that environment.” A short is a bet that an asset’s price will fall.
The dollar fell 0.7 percent to $1.2607 per euro as of 6:43 a.m. in London from the close in New York on May 25, when it touched $1.2496, the strongest since July 6, 2010. The U.S. currency weakened 0.4 percent to 79.35 yen. The euro added 0.3 percent to 100.01 yen.
The euro has lost 4.8 percent this month, poised for the biggest monthly slump since September. It has declined 2.8 percent since the end of last year, when it completed a second- straight annual loss.
U.S. financial markets are shut today for the Memorial Day national holiday.
Hedge funds and other large speculators increased wagers the euro will decline versus the dollar to 195,361 in the period ended May 22, the most on record going back to 1999, according to the Washington-based Commodity Futures Trading Commission.
Greek Opinion Polls
New Democracy, which supports the plan negotiated by Greece’s government with international lenders, placed first in all six opinion polls published on May 26 as campaigning continued for next month’s general election. The party led by a margin of as much as 5.7 percentage points over Syriza, the main party opposed to implementing the terms of financial aid packages, according to a poll by Kapa Research SA for To Vima newspaper.
Demand for the European currency was limited before data that may show the prolonged debt crisis is hurting the region’s economic growth.
A final reading will probably confirm that consumer confidence in the euro area was at minus 19.3 in May, little changed from minus 19.9 in the previous month, according to economist estimates in a Bloomberg News survey before the figures are released May 30. The unemployment rate climbed to 11 percent in April, the highest in data compiled by Bloomberg going back to 1990, economist forecasts in a separate poll showed before the June 1 report.
Bank Capital
“The base case is that it’s on track for about $1.20, $1.21 or so,” Sean Callow, a senior currency strategist in Sydney at Westpac Banking Corp. (WBC), said about the euro today in an interview with Bloomberg Television. “That’s pretty much just based on the deceleration in the European economy.”
Spain plans to inject public debt instead of cash directly into the Bankia Group to pay for the bank’s recapitalization and avoid having to go to market with the instruments, El Pais reported yesterday, without citing anyone.
Until now, to pay for bank bailouts, the state would sell debt in the market through its bank rescue fund and use the cash to aid banks. A jump in yields has made debt sales more difficult and expensive, El Pais said.
This type of step “may generate more worry in markets,” Emma Lawson, a currency strategist in Sydney at National Australia Bank Ltd. (NAB), wrote in a research note today.
Spanish Yields
Spain’s 10-year bond yield rose to this year’s high of 6.51 percent on May 16 and was at 6.31 percent at the end of last week. Standard & Poor’s cut the nation’s credit rating on April 26 to BBB+ from A, saying there is an increasing likelihood that the government will need to provide further fiscal support to the banking sector.
The euro is likely to continue falling after breaching the 76.4 percent Fibonacci retracement of its advance from the January low and the March high, Bank of Tokyo-Mitsubishi UFJ Ltd. said in a report today. The common currency may test 97.04 yen, the January low, according to the note. Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching certain highs or lows.
BOJ board members said they need to avoid any “misunderstanding” that the central bank would continue to increase the size of its program in an automatic manner, according to the minutes released today. The BOJ on April 27 boosted the amount of government debt it plans to buy for the period through June 2013.
“It looks like the BOJ is taking a somewhat less aggressive stance toward its easing measures,” said Daisuke Karakama, a market economist in Tokyo at Mizuho Corporate Bank Ltd., a unit of Japan’s No. 3 banking group by market value. “That’s leading to a bit of buying in the yen.”
To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net.
To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net
