BLBG:Euro Falls Versus Most Major Peers Before Confidence Data
The euro slid against most of its major peers before data next week that economists say will show a gauge of consumer confidence was near a three-year low and manufacturing continued to shrink in the 17-nation region.
Europe’s common currency was 0.2 percent from a more than three-year low versus the British pound after Spain’s borrowing costs surged at an auction yesterday, rekindling concern the region’s debt crisis is deepening. The dollar strengthened against a majority of its 16 most-traded counterparts as Asian stocks fell, boosting demand for the U.S. currency as a haven.
“There are a number of issues with the European economy,” said Andrew Salter, a currency strategist in Sydney at Australia & New Zealand Banking Group Ltd. (ANZ) “It is pretty clearly in quite an acute contraction. The euro is going to remain a weak currency.”
The euro lost 0.2 percent to $1.2252 as of 6:49 a.m. in London from the close in New York yesterday. It fell 0.2 percent to 96.30 yen. The dollar was little changed at 78.60 yen. For the week, the European currency declined 0.7 percent versus the yen and was little changed against the dollar. The greenback has slid 0.7 percent against the yen since July 13.
The MSCI Asia Pacific Index (MXAP) of shares lost 0.8 percent, trimming a weekly gain to 1.1 percent.
European Confidence
An index of household sentiment in the euro region was probably unchanged this month from June at minus 19.8, economists surveyed by Bloomberg News predict. The European Commission will release the figure on July 23. The index slid to minus 21.3 in December, the lowest since August 2009.
A gauge for manufacturing in the currency bloc is estimated to be at 45.3 in July, according to a separate survey. That’s below the 50 level that separates expansion from contraction and compares with a reading of 45.1 last month. London-based Markit Economics is scheduled to report the data on July 24.
Spain sold five-year notes yesterday with an average yield of 6.459 percent, the highest since at least 2005, according to data compiled by Bloomberg.
The greenback weakened against most of its major counterparts this week amid speculation the Federal Reserve will add to monetary stimulus that debases the currency.
Slowing Growth
U.S. Commerce Department figures are likely to show on July 26 that orders for durable goods increased 0.4 percent in June, less than the 1.3 percent gain in May, according to economist estimates. The report will be followed by data due July 27 that economists say will show gross domestic product grew at an annualized 1.5 percent in the second quarter, the slowest since June 2011.
Fed Chairman Ben S. Bernanke said on July 17 that policy makers are “looking for ways to address the weakness in the economy should more action be needed.” The central bank bought $2.3 trillion of bonds in two rounds of so-called quantitative easing from 2008 to 2011, seeking to cap borrowing costs and stimulate the economy.
“The dollar is prone to selling,” said Masato Yanagiya, New York-based head of foreign exchange and money trading at Sumitomo Mitsui Banking Corp., a unit of Japan’s second-biggest financial group by market value. “Markets are leaning toward risk-on sentiment.”
The Australian dollar climbed 1.7 percent this week to $1.0401, poised for the biggest advance since the five days ended June 29.
‘Impressive Rally’
The so-called Aussie may extend its “impressive” rally to advance to an almost four-month high, Niall O’Connor, a New York-based technical analyst at JPMorgan Chase & Co., wrote in a research note yesterday.
The currency climbed this week above the 61.8 percent retracement from the Feb. 29 high to the June 1 low. That level represents the currency’s “key resistance,” according to O’Connor. There is a “growing risk” that the currency will rise to the 76.4 percent retracement at $1.0555, the analyst wrote. That would be the highest since March 27. Resistance refers to an area on a chart where traders believe orders to sell an asset may be clustered.
The implied volatility of three-month options on Group of Seven currencies touched 8.43 percent, according to a JPMorgan Chase & Co. measure, the least since November 2007. Lower volatility makes investments in currencies with higher benchmark lending rates more attractive because the risk in such trades is that market moves will erase profits.
To contact the reporters on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net.
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
