BLBG:Euro Weakens As Spanish Minister Requests Bank Aid; Yen Advances
The euro declined from a one-week high against the dollar as Spanish Budget Minister Cristobal Montoro called for European Union funds to be used to shore up the nation’s banks.
The 17-nation currency weakened for the first time in three days against the yen after European retail sales fell more in April than economists forecast and German factory orders declined. The yen strengthened against most of its major counterparts as investors sought safer assets. The pound fell versus the dollar after Egan-Jones Ratings Co. cut the U.K.’s credit ranking.
Rallies in the euro “are still worth selling into because the structural negatives are not going to go away,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “There are still a lot of structural headwinds, and the data isn’t particularly constructive, and the lack of political coherence is another ongoing concern.”
The euro dropped 0.7 percent to $1.2416 at 7:25 a.m. in New York after rising to $1.2542, the strongest level since May 29. The shared currency dropped 0.8 percent to 97.11 yen. The yen gained 0.1 percent to 78.23 per dollar.
Spanish banks don’t need an “excessive” amount of funds, and the question is “where that figure comes from,” Montoro said today in an interview with broadcaster Onda Cero. “That’s why it’s so important that the European institutions open up and help us achieve, help facilitate, that figure because we’re not talking about astronomical figures.”
Retail Sales
Euro-region retail sales declined 1.0 percent in April, after gaining 0.3 percent the previous month, the European Union’s statistics office said in Luxembourg. Economists forecast a drop of 0.1 percent, according to a Bloomberg News survey. German factory orders fell 1.9 percent from March, the Economy Ministry said in Berlin.
“With economic data showing little signs of stabilization, lingering political uncertainty in Greece, and concerns about Spanish banking, headwinds for the euro will persist over the medium-term,” Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co. in New York, wrote today in a note to clients. The shared currency may drop to $1.2385 before finding support, he said.
The euro has declined 3.7 percent over the past six months, the worst performer among 10 developed-nation currencies, according to Bloomberg Correlation-Weighted Indexes. The dollar gained 4.8 percent, and the yen appreciated 4.2 percent.
‘Unstable Situation’
Finance ministers and central bank governors from the Group of Seven will hold a call today to discuss the debt crisis.
G-7 members are “concerned about the unstable situation in the current global economy and we need to share these concerns,” Japan’s Finance Minister Jun Azumi told reporters in Tokyo. Canadian Finance Minister Jim Flaherty said yesterday in Ottawa that officials would discuss “the situation in Europe,” without elaborating.
The European Central Bank will keep its main refinancing rate at a record-low 1 percent at a meeting tomorrow, according to economists surveyed by Bloomberg.
The pound approached the lowest in more than four months versus the dollar after Egan-Jones lowered the U.K.’s rating by one level to AA-, citing concern the nation will be unable to keep reducing its budget deficit as the economy weakens.
BOE Meeting
Bank of England policy makers will keep their main interest rate at a record low 0.5 percent on June 7, according to all 55 economists in a Bloomberg survey. The central bank will hold its asset-purchase plan at 325 billion pounds ($499 billion), according to the median forecast of a separate Bloomberg survey.
Sterling dropped 0.3 percent to $1.5342 after falling to $1.5269 on June 1, the lowest level since Jan. 13.
The dollar is poised to weaken toward 75.56 yen after dropping below key technical levels, Bank of America Corp. said.
The U.S. currency may extend losses after it closed below the so-called cloud on a weekly ichimoku chart, according to MacNeil Curry, New York-based head of foreign-exchange and interest-rates technical strategy. The greenback weakened to 75.35 yen on Oct. 31, the lowest since World War II.
Ichimoku analysis is used to predict a currency’s direction through analyzing the midpoints of historical highs and lows.
To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net Keith Jenkins in London at kjenkins3@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
