Euro Trades Near 2-Week Low Versus Dollar on Downgrade Concerns
The euro traded near a more than two-week low against the dollar as prospects for more credit downgrades in Europe increased concern about the ability of some nations to tap the international bond market.
The shared currency reached a record low against the Swiss franc as the cost of protecting the sovereign bonds of Greece and Portugal from default rose yesterday. The dollar rallied from a one-week low versus the yen before data forecast to show the U.S. economy expanded more than earlier estimated. New Zealand’s currency was near a decade low against Australia’s on speculation a report tomorrow will show the smaller economy slowed last quarter.
“Everyone knows that the possibility of downgrades is around, but when the ratings agencies come out and say something you get a quick reaction,” said Matthew Brady, executive director for foreign exchange at JPMorgan Chase & Co. in Sydney. “Rallies in the euro will be sold.”
The euro traded at $1.3127 as of 9:55 a.m. in Tokyo from $1.31 in New York yesterday, when it touched $1.3074, the lowest since Dec. 2. The common currency bought 109.93 yen after earlier reaching 109.57 yen, matching its Dec. 7 low. The franc traded at 1.2559 per euro after touching 1.2534, a record since the creation of the common currency.
The dollar was little changed at 83.77 yen after yesterday reaching 83.50 yen, the least since Dec. 14.
Movements in currency markets may be volatile as liquidity thins going into the holiday season, Brady said.
Portugal’s bond rating may be downgraded one or two levels by Moody’s Investors Service after the company warned yesterday of concern that budget cuts will worsen the country’s “sluggish” economic growth. Greece may have its credit rating cut to non-investment grade by Fitch Ratings within six weeks.
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