Euro Weakens as European Regulators Extend Short-Selling Bans; Rand Climbs

The euro weakened for a second day against the dollar as European regulators extended bans on short-selling in equity markets in an effort to prevent the region’s sovereign-debt crisis from worsening.

The yen fell versus all of its 16 most-traded peers as speculation that Federal Reserve Chairman Ben S. Bernanke may disappoint investors betting on more economic stimulus fueled demand for the safety of U.S. Treasuries. Bernanke gives a speech tomorrow in Jackson Hole, Wyoming. South Africa’s rand climbed as gold erased losses while stocks slid.

“The European fundamentals will come to the fore as people move past Jackson Hole and pressure the euro in the medium term,” said Dean Popplewell, head analyst in Toronto at the online currency-trading firm Oanda Corp. “People are trying not to get stuck with toxic positions ahead of tomorrow as the market has over-hyped what Bernanke will say and will be very disappointed.”

The euro fell 0.2 percent to $1.4379 at 5 p.m. in New York, from $1.4414 yesterday. It touched $1.4328, the lowest level since Aug. 19, after gaining earlier as much as 0.4 percent.

The 17-nation currency strengthened 0.4 percent to 111.38 yen, from 110.96. The dollar gained 0.6 percent to 77.46 yen, from 76.98 yen.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trade partners including the euro and yen, gained 0.3 percent to 74.234 after declining 0.3 percent earlier.

Panic Selling

Stocks tumbled after panic selling on speculation on the bans pushed Germany’s DAX Index down 4 percent in 15 minutes. The gauge pared the loss to 1.7 percent. The Standard & Poor’s 500 Index snapped a three-day rally, dropping 1.6 percent after earlier climbing as much as 1.1 percent.

The euro slid as French, Italian and Spanish stock-market regulators extended the temporary short-selling bans they introduced this month in a bid to stem market volatility. Spain and Italy lengthened their bans through Sept. 30, regulators in both countries said in a statement. France’s Autorite des Marches Financiers said its ban could last through Nov. 11.

The three countries, along with Belgium, imposed bans on short-selling of some financial stocks earlier this month in an effort to stabilize markets after European banks including Societe Generale SA hit their lowest levels since the credit crisis of 2008. Belgium’s ban is indefinite.

Blame From Politicians

Short investors sell borrowed shares with plans to buy them back later at a lower price, a practice politicians and some investors blame for roiling markets.

Germany’s Finance Ministry denied speculation about an extension of a ban on naked short-selling to all transactions, it said in an e-mailed statement. In a naked short-sale, traders agree to sell a security they have not arranged to borrow.

South Africa’s currency climbed versus the dollar as slumping stocks revived gold’s appeal. The rand appreciated 0.4 percent to 7.2398 per dollar. Gold for December delivery rose 1 percent to $1,774.70 an ounce after falling 3 percent earlier.

Bernanke speaks tomorrow at the Kansas City Fed’s annual economic conference in Jackson Hole. At the event last year, he foreshadowed the central bank’s second round of quantitative easing, the purchase of $600 billion of Treasuries from November through June, to support the economy.

Investors speculating Bernanke will signal additional monetary stimulus may have overestimated the Fed chairman, said Brian Taylor, chief currency trader a Manufacturers & Traders Trust in Buffalo, New York.

‘Non-Event Tomorrow’

“We are expecting Bernanke to be a non-event tomorrow,” Taylor said. “The market got a little ahead of itself believing that he was going to set some kind of policy outside of the normal Fed meeting or even directional tone.”

Bernanke’s speech will come after data tomorrow forecast to show the U.S. economy grew more slowly from April through June than initially estimated. Gross domestic product expanded at a 1.1 percent annual rate, according to a Bloomberg News survey of economists, compared with an earlier estimate of 1.3 percent. The economy grew at a 0.4 percent pace in the first quarter.

Treasury 10-year notes gained for the first time in four days, pushing yields on the benchmark securities down seven basis points, or 0.07 percentage point, to 2.23 percent.

Franc Strengthens

The Swiss franc gained for the first time this week against the dollar and euro. It appreciated 0.4 percent to 79.30 centimes to the U.S. currency. Against the euro, the franc rose 0.6 percent to 1.1403.

The Swiss National Bank on Aug. 3 cut key interest rates to near zero in an attempt to curb gains in the franc, which has rallied 14 percent against the euro in the past 12 months.

The franc rose 3 percent against nine developed-nation counterparts over the past month, according to Bloomberg Correlation-Weighted Currency Indexes. The euro advanced 0.8 percent, the dollar gained 1.8 percent and the yen gained 2.4 percent.

The Nuremberg, Germany-based market research company GfK SE forecast its consumer sentiment index will decline for a sixth month in September amid household concern that the global economy is slowing. Other data this week showed business confidence in Europe’s biggest economy was at the lowest in more than a year and investor sentiment slid the most in five years.

To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net