Euro Plunges as Greek Leader Loses Support
Euro Plunges as Greek Leader Loses Support
Vladimir Rys Photography/Getty Images
A portrait of Greek prime minister Georgios Papandreou is pictured is shown during a protest against plans for new austerity measures June 15, 2011 in Athens, Greece.
A portrait of Greek prime minister Georgios Papandreou is pictured is shown during a protest against plans for new austerity measures June 15, 2011 in Athens, Greece. Photographer: Vladimir Rys Photography/Getty Images
June 1 (Bloomberg) -- Mitul Kotecha, head of global foreign-exchange strategy at Credit Agricole SA in Hong Kong, talks about the outlook for global currencies. Kotecha speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)
Euro Falls Amid Concerns Over EU Deadlock on Greek Plan
Hannelore Foerster/Bloomberg
A visitor walks past the European Central Bank logo, featuring a euro symbol, in Frankfurt, Germany.
A visitor walks past the European Central Bank logo, featuring a euro symbol, in Frankfurt, Germany. Photographer: Hannelore Foerster/Bloomberg
The euro dropped the most in more than a month against the dollar after the Greek prime minister’s government lost political support as the European Union struggled to break a deadlock on a second financial rescue for the nation.
Europe’s shared currency fell versus most of its major counterparts, except for Sweden’s krona and Norway’s krone, which dropped as commodity prices slumped. Demand for assets linked to growth also eased after reports showed slowing manufacturing in the U.S. Sterling fell versus the dollar after a report showed Britain’s jobless claims rose in May more than economists forecast.
“The Greek issue doesn’t look like it’s going to go away any time soon,” said Aroop Chatterjee, a currency strategist at Barclays Plc in New York. “We see more downside risk for the euro area on the macro front, and for the euro as well.”
The euro fell 1.7 percent to $1.4201 at 12:40 p.m. in New York, from $1.4440 yesterday, after touching $1.4181, the lowest level since May 27. The currency slid 1.2 percent to 114.80 yen, from 116.23. The dollar gained 0.5 percent to 80.86 yen, from 80.49, after touching 81.06, the highest level since June 2.
Europe’s common currency has depreciated 1.2 percent in the past week against nine other developed-nation currencies, according to Bloomberg Correlation-Weighted Currency Indexes. The dollar has risen 1.6 percent.
Greek Developments
The euro fell today by the most since May 5.
“Some resolution is necessary and the longer Greece kind of wavers in this grey area the more toxic for the euro,” said Jessica Hoversen, a New York-based analyst at futures broker MF Global Holdings Ltd. “Euro weakness will be broad based.”
The euro may fall below $1.40 for the first time in three weeks, according to Citigroup Inc., citing technical indicators.
The failure of the euro to break above $1.4711, the 76.4 percent Fibonacci retracement level from the May 4 high of $1.4940, has seen the euro weaken 3.3 percent against the dollar. Today’s break below the 55-day moving average of $1.4409 may see the euro weaken to $1.3970, said Tom Fitzpatrick, chief technical analyst at Citigroup in New York.
“The inability to break the 76.4 percent retracement level signaled a danger to push lower,” Fitzpatrick said in an interview. “The euro is trading heavily, so our sense is we can go and retest the $1.3968 level and if that breaks there is a danger we see that move accelerate.”
Seeking Unity
Greek Prime Minister George Papandreou’s, who was trying to form a national unity government with the country’s biggest opposition party, was told to resign by the opposition.
Papandreou, struggling to push through austerity measures demanded by international lenders, was told to step aside and let the president name a so-called technical government to renegotiate the terms of the nation’s rescue package, said an official in the opposition New Democracy Party.
Police fired tear gas at 20,000 people that encircled the Parliament House today to protest Papandreou’s additional wage cuts and tax increases. The nation’s two biggest unions were on strike.
German Chancellor Angela Merkel and French President Nicolas Sarkozy will meet on June 17 in Berlin, with pressure mounting for the leaders to resolve their differences over a rescue for Greece. Standard & Poor’s lowered Greece’s credit rating on June 13 to the lowest among nations.
EU Meets
EU finance ministers agreed yesterday to convene again on June 19 after they failed to reconcile a German-led push for bondholders to share part of the cost of a new plan for Greek aid. European Central Bank warnings were backed by France that the move might constitute the region’s first sovereign default.
Sterling weakened as the Office for National Statistics reported that the U.K.’s jobless claims rose by 19,600 in May after a revised 16,900 increase in the prior month. The median forecast of 22 economists in a Bloomberg News survey was for an increase of 6,500. The pound lost 0.7 percent to $1.6256.
U.K. consumer confidence jumped the most in 5 1/2 years in May, figures from the Nationwide Building Society show. Nationwide’s index of sentiment gained 11 points to 55, the highest in five months. The pound touched 87.74 pence per euro, the strongest since June 2.
Stocks, Commodities
The Standard & Poor’s 500 Index fell 1.5 percent and the Thomson Reuters/Jefferies CRB Index of commodities fell 1.4 percent. Canada’s dollar declined 1.3 percent to 98.09 cents per U.S. dollar.
Norway’s krone dropped 0.6 percent to 7.8561 per euro and the Swedish krona lost 0.4 percent to 9.1917 per euro.
The consumer-price index increased 0.2 percent, compared with the 0.1 percent median forecast of economists surveyed by Bloomberg News, figures from the Labor Department showed today in Washington. The core measure, which excludes more volatile food and energy costs, climbed 0.3 percent, the biggest increase since July 2008.
The Federal Reserve Bank of New York’s general economic index dropped to minus 7.8, the lowest level since November, from 11.9 in May. The median forecast in a Bloomberg News survey of economists was 12. Industrial production in the U.S. rose 0.1 percent in May after no change the prior month, figures from the Fed showed today.
To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Garth Theunissen in London gtheunissen@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
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