BLBG:Euro Declines as Greek Debt Stalemate Increases European Crisis Concern
The euro weakened against 13 of its 16 major counterparts before Greek leaders respond today to demands by international creditors on economic measures.
The 17-nation currency slid versus the dollar with France set to sell as much as 8.5 billion euros ($11 billion) of bills today. The dollar extended its gain versus the yen to a third day before St. Louis Federal Reserve President James Bullard speaks amid speculation the U.S. central bank will avoid easing monetary policy further. Australia’s currency retreated for the first time in five days after government data showed the nation’s retail sales unexpectedly declined.
“The movement in euro is directly related to the concerns in the market that Greece may not get an agreement,” said Emma Lawson, a currency strategist at National Australia Bank Ltd. in Sydney. “There is some hesitation in the currency market” ahead of today’s response.
The euro fell 0.6 percent to $1.3085 as of 2:22 p.m. in Tokyo from the close in New York on Feb. 3. It lost 0.3 percent to 100.46 yen. The dollar advanced 0.2 percent to 76.77 yen after gaining 0.5 percent over the previous two trading days.
Greek political-party leaders must provide a first response to demands by the European Union, European Central Bank and International Monetary Fund on economic measures, including wage cuts, by 11 a.m. local time today, a spokesman for the biggest party, Pasok, told reporters in Athens.
Prime Minister Lucas Papademos struck a tentative deal with party leaders to extend spending cuts after euro-area finance chiefs told them an increase in the 130 billion-euro aid package wasn’t forthcoming.
‘Declaration of Bankruptcy’
“If we determine that it’s all going wrong in Greece, then there won’t be a new program -- and that means in March you’ll have a declaration of bankruptcy,” Luxembourg’s Jean-Claude Juncker, who chairs euro finance meetings, told Der Spiegel magazine in an interview published yesterday.
Futures traders reduced their bets that the euro will decline against the dollar, figures from the Washington-based Commodity Futures Trading Commission showed. The difference in the number of wagers by hedge funds and other large speculators on a drop in the euro compared with those on a gain was 157,546 on Jan. 31, down from a record 171,347 a week earlier.
The euro has fallen 4.7 percent over the past three months, the worst performance among the 10 developed-nation currencies tracked by the Bloomberg Correlation-Weighted Indexes. The yen has advanced 3.2 percent and the dollar has gained 1.1 percent.
Bank of Japan Governor Masaaki Shirakawa said the nation’s economic condition is “severe” because of deflation and the strong yen. The central bank is implementing strong monetary easing measures and will take appropriate steps as needed, he said in parliament in Tokyo today.
Monetary Policy
U.S. government data showed on Feb. 3 that nonfarm payrolls rose by 243,000 in January, surpassing the 140,000 increase estimated by economists. The benchmark yield on 10-year Treasuries jumped 10 basis points to 1.92 percent that day, the biggest gain since Dec. 20.
“I need to see significant deterioration in the economy and some threat of deflation or inflation moving significantly below our inflation target before” backing more bond buying by the Fed, Bullard said on Feb. 3 in an interview. He is due to speak about inflation targeting today in Chicago.
The Fed pledged last month to keep the benchmark interest rate near zero until late 2014. The central bank purchased $2.3 trillion of Treasury and mortgage-related bonds in two rounds of so-called quantitative easing, or QE, that ended in June.
‘Get Traction’
“The stronger U.S. data will increasingly be supportive of the U.S. dollar,” said Sean Callow, a senior currency strategist in Sydney at Westpac Banking Corp., Australia’s second-largest lender. “We would think the U.S. dollar will increasingly get traction, particularly if it’s enough to impress the Fed and to stop them considering QE3.”
The Australian dollar, known as the Aussie, fell against 11 of its 16 major peers after the Bureau of Statistics said the country’s retail sales fell 0.1 percent in December from a month earlier. Economists had estimated a 0.2 percent gain.
The Reserve Bank of Australia will lower the benchmark interest rate to 4 percent from 4.25 percent in a meeting tomorrow, another survey of economists shows.
“The market has got a high chance of a rate cut priced in for tomorrow and this number isn’t going to change that,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia, referring to retail sales data. “If they do deliver a cut, the Aussie might fall, but the major push to the Aussie from the RBA is going to come from their statement.”
Australia’s dollar lost 0.5 percent to $1.0715 and dropped 0.3 percent to 82.29 yen.
To contact the reporters on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net
To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net
