BLBG:Euro Drops as Catalan Independence Parties Win Local Vote
The euro fell for the first time in six days against the yen before European finance ministers reconvene in Brussels to decide on aid for Greece.
The 17-nation currency weakened versus all but two of its major counterparts as European stocks declined, damping demand for the region’s assets. The euro also dropped after pro- independence parties in Spain’s Catalonia won a majority in a regional vote, underpinning a drive for a referendum on secession in defiance of Spanish Prime Minister Mariano Rajoy. The yen strengthened as a technical indicator signaled the currency’s recent decline may have been excessive.
“It seems a final agreement for Greece is very close, although this is another measure which kicks the can down the road,” said Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “We see relative stability for the euro into year-end, while the scale of yen selling has been somewhat excessive this month and there is risk of a near-term correction.”
The euro dropped 0.6 percent to 106.32 yen at 9:21 a.m. in London after appreciating to 107.14 yen, the highest since April 27. The single currency slid 0.2 percent to $1.2956. The yen gained 0.4 percent to 82.06 per dollar.
Finance chiefs from the 17-member single currency meet today, less than a week after an all-night gathering failed to yield agreement and days after a European Union summit broke up without a proposed seven-year budget. At stake is the continuation of a three-year mission to return Greece to financial health.
‘Third Time’
“It would be irresponsible not to reach an accord given all the efforts that have been made on all sides,” French Finance Minister Pierre Moscovici said late yesterday on BFM television. “I’m not going to guarantee that an accord will be reached, but I think the third time should be the charm.”
Catalan President Artur Mas, who called early elections to force the debate on independence, won 50 of the 135 seats in the regional assembly for his Convergencia i Unio party, down from 62, with 99 percent of the vote counted. The separatist Catalan Republican Left, known as the ERC, more than doubled its seats to 21 from 10. Two smaller parties that also back a plebiscite secured 16 seats.
Mas has pledged a referendum within four years. In contrast, the ERC would be willing to declare independence unilaterally in 2014.
Relative Strength
The 14-day relative strength index for the yen against the dollar was at 25 at the end of last week, below the level of 30 that some traders see as a sign an asset’s decline has been too rapid and is about to change direction.
The yen has depreciated against all its major peers this month amid speculation a general election in December will hand power to the opposition party that advocates aggressive monetary stimulus by the BOJ.
A few members of the central bank’s policy board said Japan’s economy entered a recessionary phase, while one indicated the need for new ways to boost price expectations, minutes of the Oct. 30 meeting published today showed. The BOJ last month increased asset purchases by 11 trillion yen, announced a new lending program and signed a joint statement with the government on ending deflation.
The yen has weakened 3.5 percent this month, the worst performer among 10-developed-market currencies tracked by Bloomberg. The euro is little changed, while the dollar dropped 0.2 percent.
To contact the reporter on this story: Neal Armstrong in London at narmstrong8@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
