Euro Declines Before Spanish Sales, German Confidence
By Kristine Aquino and Masaki Kondo - Apr 16, 2012 5:55 PM GMT-0700
The euro fell versus most of its 16 major counterparts before Spain sells securities after borrowing costs climbed to the highest level this year, boosting concern Europe’s debt crisis is spreading.
The 17-nation currency weakened against the dollar before reports that may show confidence among investors in Germany, Europe’s biggest economy, fell this month after climbing to a 21-month high in March. Australia’s dollar remained lower after a two-day decline versus its U.S. counterpart before the Reserve Bank releases minutes of this month’s meeting today.
April 16 (Bloomberg) -- Axel Merk, president at Merk Investments LLC, talks about his investment strategy for currencies and Europe's sovereign debt crisis. He speaks with Pimm Fox on Bloomberg Television's "Taking Stock." (Source: Bloomberg)
“My feeling is that it’s still overall a bearish mood with regard to the euro,” said Kara Ordway, a currency strategist at City Index Group Ltd. in Sydney. The debt sale “will give us a first indication as to how currently people view Spain.”
The euro lost 0.2 percent to $1.3117 at 9:51 a.m. in Tokyo after reaching $1.2995 yesterday, the lowest level since Feb. 16. The shared currency fell 0.1 percent to 105.62 yen after dropping 0.2 percent to 105.67 yesterday. The U.S. dollar was little changed at 80.52 yen after declining yesterday to 80.30, the weakest since Feb. 29.
Spain will sell 12-month and 18-month bills today, followed by auctions of debt due in 2014 and 2022 on April 19.
Yields on the nation’s 10-year notes soared as much as 18 basis points, or 0.18 percentage point, to 6.16 percent yesterday. That’s the highest level since Dec. 1 and is edging toward the 7 percent level that pushed Greece, Ireland and Portugal into rescues. The cost of insuring against a Spanish default rose eight basis points to 511 yesterday, the highest on record, according to CMA.
Spanish Prime Minister Mariano Rajoy said his nation must slash its budget deficit in order to maintain access to financing. “The fundamental objective at the moment is to reduce the deficit,” Rajoy told a conference in Madrid yesterday. “If we don’t achieve this, the rest won’t matter: we won’t be able to fund our debt, we won’t be able to meet our commitments.”
Spain has the euro area’s fourth-biggest economy and the government forecasts it’ll contract 1.7 percent this year as the deepest budget cuts in more than 30 years are implemented. The plan seeks to shrink the deficit to 5.3 percent of gross domestic product this year from 8.5 percent last year.
Germany’s ZEW Center for European Economic Research in Mannheim will probably report today its index of investor and analyst expectations, which aims to predict economic developments six months in advance, fell to 19 in April from 22.3 in March, according to the median estimate in a Bloomberg News survey. Last month’s figure was the highest reading since June 2010.
“The euro should continue to be constrained by the prospect of soft ZEW survey results today amid already nervous conditions in peripheral bond markets,” Cameron Umetsu, a currency strategist at UBS AG, wrote in a report.
The euro has lost 0.2 percent in the past month, according to Bloomberg Correlation Weighted Indexes. The Australian dollar dropped 2.3 percent in the same period, the worst performance among the 10 developed-nation currencies tracked by the gauge.
The Reserve Bank of Australia will release minutes of its April 3 meeting, when officials held the benchmark interest rate unchanged at 4.25 percent. Governor Glenn Stevens signaled a willingness to lower rates after the board “judged the pace of output growth to be somewhat lower than earlier estimated.”
The so-called Aussie lost 0.1 percent to $1.0350 after declining 0.8 percent in the past two days.
To contact the reporters on this story: Kristine Aquino in Singapore at firstname.lastname@example.org; Masaki Kondo in Singapore at email@example.com