Euro Falls to Two-Month Low Versus Dollar, Yen on Concern Crisis to Spread
The euro traded near a two-month low against the yen on concern that Ireland’s banking crisis will spread to Portugal and Spain amid signs the region’s economic recovery is slowing.
The currency headed for its first monthly loss versus the dollar since August after Spanish 10-year bonds slid by the most since the euro’s debut and before data that may show Europe’s unemployment rate held at a 12-year high. The dollar was close to a two-month high against the yen ahead of a report forecast to show U.S. consumer confidence rose a second month. The Australian dollar rose for the first time in four days after the nation’s building approvals increased by the most since March.
“Markets think Europe’s debt crisis story won’t end here with Ireland,” said Shinichi Hayashi, a dealer at Shinkin Central Bank, the central institution for Japan’s financial cooperatives. “There’s uncertainty over the banking sector in other countries in the region. I see the euro falling.”
The euro bought 110.56 yen as of 11:52 a.m. in Tokyo from 110.60 yen in New York yesterday, when it touched 110.26, the lowest since Sept. 15. It was at $1.3137 from $1.3125. The dollar fetched 84.14 yen from 84.26 yen yesterday when it appreciated to 84.41 yen, the strongest level since Sept. 27.
The 16-nation euro area’s jobless rate remained unchanged from the previous month at 10.1 percent in October, according to a Bloomberg News Survey of economists before today’s report. That’s would be the highest reading since 1998.
Gross domestic product in the 16-nation euro region may grow at a 1.5 percent rate in 2011 from 1.7 percent this year, the Brussels-based European Commission said in a report published yesterday.
The euro has fallen 1.4 percent in November versus the yen and 5.8 percent against the greenback, the worst performance among major currencies.
“As markets continue to fret over Irish contagion, we wouldn’t be surprised to see further declines in the euro- dollar,” Spiros Papadopoulos, a senior economist at National Australia Bank Ltd. in Melbourne, wrote in a research note today. The next key support level is viewed as around $1.3000 per euro, he said.
Investor concern has shifted to Spain and Portugal since Nov. 28, when European governments sought to bolster the euro by giving Ireland an 85 billion-euro ($112 billion) bailout package and scaling back proposals that would have forced bondholders to bear some costs of future aid.
The 10-year Spanish bond yield jumped 28 basis points yesterday to as high as 5.45 percent, the highest since 2002. The difference in yield, or spread, over German bunds rose to a euro-era record of 267 basis points.
“Portugal needs to assure strong fiscal consolidation continuing in 2012 and beyond,” European Union Economic and Monetary Affairs Commissioner Olli Rehn said yesterday. If growth proved to be “somewhat lower” than expected, “then it’s essential still to meet fiscal targets by taking additional measures,” he said. Rehn will speak in Brussels today.
The dollar is poised for its first monthly gain since April against the yen on speculation the U.S. economic recovery is picking up. The Conference Board’s confidence index climbed to 53.0 this month from 50.2 in October, according to a Bloomberg News survey of economists before today’s report.
“We’ll likely to get a series of favorable economic data for the dollar,” said Keiji Matsumoto, a currency strategist in Tokyo at Nikko Cordial Securities Inc. “Improving consumer sentiment is one of factors that pushes the greenback higher.”
The Dollar Index, which tracks the dollar against the currencies of six major U.S. trading partners, was at 80.745 from 80.837 yesterday, when it touched 81.142, the highest since Sept. 21.
The so-called Aussie advanced after a government report showed the number of permits granted to build or renovate houses and apartments advanced 9.3 percent from September.
“The data has been rather positive, and I think that’s given a little bit of support to the Aussie,” said Mitul Kotecha, the Hong Kong-based head of global foreign-exchange strategy at Credit Agricole CIB. “A jump in building approvals was particularly surprising, quite robust reading.”
Australia’s currency was at 96.35 U.S. cents from 96.31 cents yesterday when it reached 95.67 cents, a level not seen since Oct. 5.
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