Euro at 3-Month Low as Greek Concerns Weigh on Debt Sales
The euro slid to a three-month low before Italy, Spain and France sell bonds next week amid concern the region’s debt crisis is deepening.
The shared currency headed for a second weekly drop as Greek political leaders go into a fifth day of talks to form a government and before an official report forecast to show the euro region’s economy contracted for a second quarter. The dollar and the yen were poised to rise versus most major peers this week as concern Greece will be unable to stay in the euro bloc boosted demand for safer assets.
“We can’t become positive and buy the euro,” said Daisaku Ueno, a senior foreign-exchange and fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. “Regardless of whether Greece exits the euro, it will take a lot of time to resolve the region’s debt crisis.”
The euro weakened to $1.2907, the lowest since Jan. 23, before trading at $1.2909 as of 10:38 a.m. in Tokyo, 0.2 percent lower than the close in New York. It’s poised for a 1.4 percent decline this week. The common currency slid 0.2 percent to 103.16 yen, set for a 1.3 percent drop since May 4. The dollar was little changed at 79.92 yen.
Italy will sell securities on May 14 maturing in 2015, 2020, 2022 and 2025, followed by Spanish and French debt sales on May 17. It will be the first French auction after Francois Hollande is sworn in as president on May 15.
Greek Politics
Greece’s political impasse following an inconclusive May 6 election has raised the possibility that another contest will have to be held as early as next month, threatening the implementation of austerity pledges. The standoff has reignited European concerns over Greece’s ability to hold to the terms of its two bailouts negotiated since May 2010 and stoked speculation the nation will have to leave the currency union.
Gross domestic product in the 17-nation euro area probably declined 0.2 percent in the first quarter from the prior three months when it slid 0.3 percent, according to the median estimate of economists in a Bloomberg News survey. The European Union’s statistics office will release the figures on May 15.
“The bottom of Europe’s economic slowdown has yet to be seen,” said Yuki Sakasai, a currency strategist in New York at Barclays Plc. “The euro will remain under downward pressure.”
The euro also weakened against the British pound, declining to as low as 79.97 U.K. pence, the least since November 2008.
Goldman Sachs Group Inc. cut its forecasts for the euro to $1.33 from $1.38 for the next six months and to $1.40 from $1.45 in 12 months, the New York-based company said in a note yesterday. Economic data suggest an expected rebound in the euro will be delayed further, Goldman Sachs said.
To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net.
