BLBG:Euro Depreciates Against Dollar, Yen Before Greece Responds to Creditors
The euro weakened against the dollar (DXY) and yen before Greek leaders respond to demands by international creditors on economic measures.
The 17-nation currency slid against most of its 16 major peers as France prepares to sell as much as 8.5 billion euros ($11.1 billion) of bills today. The Dollar Index rose 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.
“Clearly the talks are influencing risk sentiment and the euro’s dynamics,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “Markets are still a little nervous. A Greek default is not off the table.”
The euro fell 0.5 percent to $1.3088 at 8:05 a.m. London time. It also lost 0.5 percent to 100.19 yen. The dollar was little changed at 76.61 yen.
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. Greece’s next tranche of payouts in maturing debt is due next month.
Greek Crisis
“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 3.5 percent and the dollar has gained 1.1 percent.
Monetary Policy
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.
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 Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, gained 0.5 percent to 79.308.
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.
RBA Meeting
“The Fed is also taking into consideration the development of the labor market when making rate decisions,” said You-Na Park, a foreign-exchange strategist at Commerzbank AG in Frankfurt. “There might be some speculation that the Fed might not need to ease further. We have to wait for comments from Fed members to get a clearer picture on that.”
The Australian dollar, known as the Aussie, fell against most 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.
Australia’s dollar lost 0.4 percent to $1.0728
To contact the reporters on this story: David Goodman in London at dgoodman28@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net;
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
