Euro Touches 2-Week Low Versus Yen on German Confidence

The euro touched its lowest level in almost two weeks versus the yen as German consumer sentiment stagnated and Spanish borrowing costs rose at a bill auction amid concern the region’s debt crisis is deepening.

The 17-nation euro erased losses against the dollar before German Chancellor Angela Merkel meets European Central Bank President Mario Draghi in Berlin today. Data showed German and French business confidence remained static as Italian sentiment stayed near a 15-year low. Australia’s dollar pared a decline as a leading indicator for China’s economy rose in August, supporting trade prospects.

“The euro has responded negatively to disappointing euro- zone data,” said Valentin Marinov, head of European Group of 10 foreign-exchange strategy at Citigroup Inc. (C) in London. “This shows investors are aware of deteriorating fundamentals for the euro and the potential further need for policy accommodation from the ECB.”

The euro was little changed at 100.68 yen at 7:42 a.m. New York time. It reached 100.16, the least since Sept. 13. The shared currency was little changed at $1.2936 after declining to $1.2887, also the lowest since Sept. 13. The yen traded at 77.83 per dollar after earlier touching 77.66, the strongest level since Sept. 14.

The euro will find so-called support at 100.15 yen, the 38.2 percent Fibonacci retracement of its July-September advance, technical analysts at Credit Suisse Group AG (CSGN), including David Sneddon, wrote in an e-mailed note.

Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, currency or index.

Citigroup has a three-month euro-dollar forecast of $1.32, Marinov said. The euro will slide to $1.27 by year-end, according to the median of bank forecasts compiled by Bloomberg.

Italian, Spanish Sales

The euro declined versus most its 16 major peers tracked by Bloomberg after Spain’s borrowing costs rose at a sale of 4 billion euros ($5.2 billion) of bills in Madrid and demand fell at a sale of Italian zero-coupon two-year notes.

The yield on three-month Spanish debt auctioned today was 1.203 percent compared with 0.946 percent at a previous sale on Aug. 28. Italy sold 3.94 billion euros of securities, compared with a maximum target of 4 billion euros. Investors bid for 1.65 times the amount sold, compared with a so-called bid-to-cover ratio of 1.95 at a sale on Aug. 28.

Nobel Prize-winning economist Joseph Stiglitz said euro members will have to share debts and speed the creation of a banking union to prevent a situation in which “the whole system falls apart.” Spain has yet to indicate whether it needs a full rescue, and discussions between Greece and its lenders on how to meet bailout commitments remain inconclusive.

Losing Urgency

The euro has dropped 3.4 percent in the past six months, the worst performance after the Swiss franc among the 10 developed-nation currencies tracked by Bloomberg Correlation- Weighted Indexes. The yen was the biggest gainer, rising 5.9 percent. The dollar lost 0.6 percent.

German consumer confidence will hold steady in October, GfK SE (GFK) said. The market-research company in Nuremberg forecast today that its consumer-sentiment index, based on a survey of about 2,000 people, will remain at 5.9 for a second-straight month, matching the median of 25 economist estimates in a Bloomberg News survey. The index was last higher in March 2011.

French industrial confidence was unchanged at 90 this month, near a two-year low, in the face of stalled growth and looming tax increases, according to Insee, the national statistics office in Paris.

An index of Italian consumer confidence in September rose to 86.2 from a revised 86.1 a month earlier, according to Istat, the national statistics office in Rome. The reading was more than the median forecast of 86 in a survey of 11 economists by Bloomberg News.

The Australian dollar pared losses after the Conference Board said its leading economic index for China rose 1.7 percent to 240.4 in August from the previous month. The so-called Aussie was little changed at $1.0432 after weakening as much as 0.2 percent to $1.0406.

To contact the reporter on this story: Neal Armstrong in London at narmstrong8@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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