BLBG: Euro Trades Near Three-Month Low as Funding Concern Clouds Debt Auctions
The euro traded near its lowest level in more than three months against the yen on concern European nations will struggle to raise funds, diminishing the allure of assets in the region.
Europe’s currency was also close to a three-month low versus the dollar after a slide in Portugal’s government bonds last week dimmed the outlook for debt auctions there, in Spain and Italy over the next three days. Australia’s dollar was near a three-week low as floods worsened in Queensland, which accounts for about 20 percent of the nation’s economy, and China reported a trade surplus that was less than economists forecast.
“It looks as though the market is pricing in some further deterioration in the sovereign debt story,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “Obviously the Portugal auction on Wednesday will be closely watched. I see euro weakness continuing.”
The euro traded at 107.28 yen as of 6:45 a.m. in London from 107.32 yen in New York on Jan. 7, when it touched 106.95 yen, the lowest level since Sept. 14. It was at $1.2906 from $1.2907, after earlier reaching $1.2867, the weakest since Sept. 14. The yen fetched 83.13 per dollar from 83.15. Financial markets in Japan are closed today for a public holiday.
Portugal will sell 2014 and 2020 bonds on Jan. 12. Italy will offer 2014 bonds and Spain will auction 2016 debt on Jan. 13, according to data compiled by Bloomberg. The yield on Portuguese 10-year bonds climbed to as high as 7.19 percent on Jan. 7, the most since Nov. 11. The yield on Spain’s 10-year bonds reached 5.54 percent last week, the highest since Dec. 21.
Portugal Pressure
UBS AG, the world’s second-largest foreign-exchange trader, recommended today that investors sell the euro at $1.2900, with a target of $1.2450 and a stop-loss order at $1.3150.
“The markets are likely to increasingly worry about Portugal’s upcoming bond auction on Wednesday and Spain’s on Thursday,” Gareth Berry, a Singapore-based currency strategist at UBS, wrote in a note today.
A stop loss is an automatic instruction to either buy or sell a currency at a certain level to limit losses in case a bet goes the wrong way.
Germany and France will pressure Portugal to seek aid from the European bailout fund soon to prevent contagion to other countries such as Spain and Belgium, Der Spiegel reported on Jan. 8, without saying where it got the information.
“Experts” in the French and German governments believe the southern European country won’t be able to raise money on capital markets for much longer, the German magazine said in a preview of a report to be published in its next edition. A German Finance Ministry spokesman said yesterday his nation isn’t pressing Portugal to tap the rescue fund.
Australia’s Dollar
Gains in Australia’s dollar were limited after the Australian Bureau of Meteorology said on its website today that a torrent of rain in the 24 hours through 5 a.m. local time will push the Mary River at Gympie to a “major flood level” of above 20 meters (66 feet) tomorrow.
“The Australian dollar weakened on concerns about the economic impact of the flooding in Queensland,” Kate King, a Sydney-based senior economist at St. George Bank Ltd., wrote in a research note today.
Damage to the state’s transport network currently stands at around A$1.5 billion ($1.49 billion), Queensland Roads Minister Craig Wallace said today. Queensland is experiencing its worst floods in 50 years, forcing the evacuation of 4,000 people and affecting about 1 million square kilometers (386,000 square miles), or an area the size of France and Germany.
China’s Trade Surplus
China’s customs bureau said today its trade surplus was $13.1 billion in December, less than the $20.8 billion median estimate of 20 economists surveyed by Bloomberg News. China is Australia’s largest trading partner and New Zealand’s second- biggest export market.
Australia’s dollar bought 99.39 U.S. cents from 99.59 cents on Jan. 7, after earlier rising to 99.83 cents. It touched 99.08 U.S. cents on Jan. 7, the lowest since Dec. 20. New Zealand’s dollar was at 75.99 U.S. cents from 75.98 cents.
To contact the reporters on this story: Ron Harui in Singapore at rharui@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
