BLBG:Euro Snaps 7-Day Rally Versus Yen Before Minister Meets
The euro broke a seven-day stretch of gains versus the yen as regional finance ministers meet in Luxembourg today amid speculation Spain is struggling to avoid a sovereign bailout request.
The shared currency weakened against all but one of its 16 major peers tracked by Bloomberg before data forecast to show German industrial production fell, adding to evidence Europe’s debt crisis is weighing on growth. German Chancellor Angela Merkel visits Greece tomorrow for the first time since 2009. Australia’s dollar touched the lowest level in almost three months versus its U.S. counterpart as shares fell and before a report this week that may show unemployment rose.
“We’ve got a euro-group meeting today and there’s clearly no sign of resolution as yet” on the debt crisis, said Neil Mellor, a foreign-exchange strategist at Bank of New York Mellon Corp. (BK) in London. “Talks with Greece are going to continue. And of course ditto with the Spanish situation. We’re more likely than not to spend the next couple of weeks, or until some resolution is made, the wrong side of $1.30.”
The euro dropped 1.1 percent to 101.40 yen at 10:40 a.m. London time, after sliding as much as 1.3 percent, its biggest intraday decline since Sept. 20. It lost 0.6 percent to $1.2969. The dollar fell 0.6 percent to 78.19 yen.
Japanese markets are shut today for a national holiday, and the U.S. is observing Columbus Day.
A technical indicator signaled the euro’s advance versus the yen was too rapid. The euro’s 14-day relative strength index versus the yen rose to 68 at the end of last week, the highest since Sept. 19 and near the 70 level that some traders see as a sign that an asset’s price has risen too fast and is poised to reverse.
German Economy
Germany’s industrial production decreased 0.6 percent in August from July, according to the median estimate of economists surveyed by Bloomberg News before the data is released at 11 a.m. Separate data today showed the nation’s exports rose 2.4 percent in August, while economists had estimated a 0.6 percent decline.
The 17-member euro slid against the greenback for the first time in three days before the new round of talks. Finance ministers from the 17-member euro area will discuss issues including Spain at 5 p.m. in Luxembourg; leaders from all 27 nations in the European Union will meet tomorrow. The European Council gathers for a summit in Brussels on Oct. 18-19.
“If nothing comes from the euro group today, which I suspect will be the case, and the Greek troika talks drift on towards the summit on the 18th and 19th, then I think we’re going to come back down to test this low of $1.28,” Mellor said.
Ministers Meet
Finance ministers today are likely to make a positive statement on Greece’s progress toward meeting austerity targets needed to authorize the nation’s next bailout payment, European Union Commissioner for Economic and Monetary Affairs Olli Rehn said in an interview in Helsinki on Oct. 6.
The debt-saddled nation needs to find spending cuts to maintain access to 240 billion euros in rescue funds and is trying to reach an agreement with its official lenders to release the next payment of 31 billion euros. Steffen Seibert, Merkel’s chief spokesman, said Oct. 5 that Germany wants to “help Greece stabilize within the euro zone.”
Greece Support
The euro has gained 1.1 percent in the past month, the best performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen has fallen 0.1 percent, while the dollar declined 0.2 percent.
“I would expect Mrs. Merkel will be giving a very strong public statement of support for Greece’s continued participation in the euro,” said Ray Attrill, global co-head of foreign- exchange strategy at National Australia Bank Ltd. in Sydney. “My guess is that that will be seen constructively as far as the euro is concerned.”
Futures traders have reduced bets over the past month that the euro will decline, according to figures from the Washington- based Commodity Futures Trading Commission.
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 50,265 on Oct. 2, around half the level of a month earlier. So-called net shorts slid to 50,238 on Sept. 25, a level unseen for 12 months.
Australia’s Dollar
Australia’s dollar fell along with Asian stocks amid diminished demand for higher-yielding assets. The so-called Aussie was little changed at $1.0182 and earlier touched $1.0149, the least since July 13.
The MSCI Asia Pacific excluding Japan Index of shares lost 1 percent. The Stoxx Euro 600 Index tumbled 0.9 percent.
“We remain cautious toward Australian dollar-U.S. dollar upside and would prefer to fade any upticks” toward the 100-day moving average of $1.0249, Oversea-Chinese Banking Corp. analysts in Singapore led by Selena Ling wrote in a research note today.
Australia’s jobless rate climbed to 5.3 percent last month from 5.1 percent in August, economist estimates compiled by Bloomberg showed before the data due Oct. 11.
China’s yuan rose to its highest level since 1993, nearing the strong end of the trading range allowed by the central bank, on speculation policy makers will take more steps to counter a slowdown in the global economy as Chinese financial markets opened today after a week-long holiday.
The yuan traded little changed at 6.2878 per dollar, according to the China Foreign Exchange Trade System. It reached 6.2812, the strongest level since China unified official and market exchange rates at the end of 1993 and exceeded the central bank’s reference rate by a record 0.98 percent, near to the maximum 1 percent divergence that is permitted.
To contact the reporters on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net; Lucy Meakin in London at lmeakin1@bloomberg.net.
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net.
