BLBG:Euro Falls Versus Yen After Spanish Bill Auction
The euro fell to the lowest level in more than a week against the yen as Spanish and Italian borrowing costs rose at debt sales amid concern a European Union summit this week will fail to solve the sovereign debt crisis.
The 17-nation currency slid against the dollar after reaching a two-week low yesterday. The greenback weakened against the yen before a report economists said will show U.S. consumer confidence fell for a fourth month in June. Australia’s dollar strengthened versus most of its 16 major counterparts as traders pared bets on an interest-rate cut.
“The euro weakness today is a reflection of the ongoing loss of investor confidence in European policy makers to deal with the crisis effectively,” said Lee Hardman, a foreign- exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “Unfortunately it still appears likely that conditions will have to get a lot worse before they prompt a more decisive policy response.”
The euro depreciated 0.6 percent to 99.07 yen at 7:44 a.m. New York time, after touching 98.92 yen, the lowest level since June 18. It fell 1.5 percent yesterday, the biggest drop since May 30. The shared currency slipped 0.2 percent to $1.2485 after touching $1.2471 yesterday, the weakest level since June 12. The dollar weakened 0.4 percent to 79.34 yen.
Auction Results
The euro may be supported by its June 1 low of $1.2288, according to data compiled by Bloomberg based on technical indicators. Support refers to an area where buy orders may be clustered. The stronger the support, the more selling is needed to break through it.
Europe’s common currency is down from this year’s high of $1.3487 on Feb. 24, and has fallen 3.6 percent against the dollar this year as the financial turmoil in the region deepened.
Italy sold 2.99 billion euros of zero-coupon notes due in May 2014 today at a yield of 4.71 percent, more than the 4.04 percent paid on May 28. Spain auctioned 3.08 billion euros of bills, with three-month securities yielding 2.36 percent, compared with 0.85 percent at the previous auction.
Spain formally requested a bailout for its banks yesterday, and Cyprus also sought a financial lifeline from the euro area’s firewall funds, becoming the fourth and fifth of the currency union’s 17 member states to require external aid.
Moody’s Investors Service downgraded 28 Spanish banks yesterday, citing the country’s sovereign debt and rising real estate losses.
‘Disappointing Outcome’
The two-day EU summit in Brussels starting June 28 is the first meeting of European leaders since Greek parliamentary elections on June 17 that saw victories for pro-bailout parties. France and Italy are urging Germany to take decisive action to end the debt crisis, now in its third year.
“We expect a disappointing outcome from the EU leaders’ summit, so therefore we think that the euro may weaken into the week’s end,” said Richard Grace, chief currency strategist and head of international economics in Sydney at Commonwealth Bank of Australia (CBA), the nation’s biggest lender. “The U.S. dollar is going to remain quite firm.”
The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain was 141,066 contracts on June 19, versus a record of 214,418 the week ended June 5, figures from the Washington-based Commodity Futures Trading Commission showed.
The euro has depreciated 2.7 percent this year, making it the worst performer among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar has risen 1.4 percent and the yen has fallen 2 percent.
U.S. Confidence
The dollar fell against the yen before a U.S. report that economists said will show consumer confidence dropped to the lowest since January. The Conference Board’s index fell to 63 this month from 64.9 in May, according to the median forecast in a Bloomberg News survey.
The so-called Aussie rebounded after touching its weakest level in 1 1/2 weeks yesterday. Reserve Bank of Australia policy makers meet next week, and are forecast to keep the key rate unchanged, according to a Bloomberg survey of economists.
Interest-rate swaps data compiled by Bloomberg show traders see a better than 50 percent chance policy makers will keep the benchmark rate unchanged next week. That’s up from a 30 percent probability seen on June 19.
The currency rose 0.3 percent to $1.0041 after reaching 99.69 U.S. cents yesterday, the lowest since June 14.
To contact the reporters on this story: David Goodman in London at dgoodman28@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
