The euro fell to the lowest in almost eight weeks against the dollar amid speculation Greece will struggle to win bailout funds, risking the nation’s future in the European monetary bloc.
The shared currency declined versus all but the Swiss franc among its 16 major counterparts after Greek Prime Minister Antonis Samaras pledged yesterday that proposed wage and pension cuts will be the last as he struggled to win political support for measure to assure the country’s lifeline. The Dollar Index rose for a third day before tomorrow’s U.S. presidential election. The pound fell against the dollar after U.K. services growth slowed. Sweden’s krona strengthened versus the euro.
“What’s going on in Greece and somewhat Spain has been the motive factor, and that’s driving the euro down,” Joseph Trevisani, chief market strategist at WorldWideMarkets Ltd. in Woodcliff Lake, New Jersey, said in a telephone interview. “Everybody thinks the Greeks are going to get their money. Everyone thinks the Spanish will come around and borrow money from the Europeans. If those conclusions changed, the euro would be much lower.”
The euro weakened 0.3 percent to $1.2796 at 5 p.m. New York time after dropping to $1.2767, the lowest level since Sept. 11. The common currency fell 0.5 percent to 102.74 yen after sliding 0.5 percent on Nov. 2. The yen appreciated 0.2 percent to 80.29 per dollar after touching 80.68 on Nov. 2, the weakest since April 27.
The Dollar Index (DXY), which IntercontinentalExchange Inc. uses to track the U.S. currency against those of six major trading partners, gained 0.2 percent to 80.73. The gauge rose above its 200-day moving average, at 80.67, for the first time since Sept. 7.
The gauge may climb to its highest level in almost 10 weeks after breaking through a key resistance level, according to JPMorgan Chase & Co., citing technical indicators. The benchmark may increase to its highest level since Aug. 28 after rising through resistance from 80.20 to 80.32, Niall O’Connor, a New York-based technical analyst at JPMorgan, wrote today in a note to clients.
Greek society won’t tolerate any more austerity measures, Samaras told lawmakers of his New Democracy Party in Athens, as coalition leaders debate the terms of the latest package. The first parliamentary vote on measures needed to obtain additional aid is scheduled to take place as early as Nov. 7.
Spain said it is working on a review of income and spending in its welfare system as it heads toward a deficit amid a deepening economic slump and the highest jobless rate in the European Union. The nation is relying on 100 billion euros ($128 billion) in European aid for its banks and potentially seeking more to shore up its public finances.
“The main direction is still one of euro being lower and continued problems in Europe,” George Dowd, head of Chicago foreign exchange for Newedge USA LLC, an institutional brokerage firm, said in a phone interview. “Nobody is putting on any big long-term positions ahead of the U.S. elections. If we get an election result that’s definitive on Tuesday, you may have some pent-up euro selling come into the market.”
Dowd said he expects the euro to fall to $1.23 by the end of the year.
The euro has weakened 3.1 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The yen has dropped 6.2 percent, the worst performer, and the dollar declined 1.7 percent.
The U.S. currency rose against 10 of its 16 major peers on speculation the winner of this week’s presidential election will press ahead with plans to curtail the nation’s deficit.
Employment and the economy are central themes before tomorrow’s vote, with President Barack Obama and Republican nominee Mitt Romney each trying to convince voters he can best energize the economic expansion.
The U.S. presidential contest, marked by two dozen lawsuits in the past six months over voter rules including photo ID requirements and limited poll hours, may see a new wave of litigation starting tomorrow over who gets to vote and which ballots will be counted. The biggest battles, however, may come after Election Day, and could lead to a replay of 2000, when courts determine the next U.S. president.
“The last time we got close to the debt ceiling and we had the credit-ratings downgrade, around that period we saw the markets struggle and the dollar do very well,” Nick Bennenbroek, head of currency strategy at Wells Fargo & Co. in New York, said in an interview on Bloomberg Televison’s “Lunch Money” with Sara Eisen. “The election outcome is unclear at this point but, what’s pretty sure is, we’re going to get some difficult budget negotiations afterward.”
The U.S. was stripped of its AAA credit rating on Aug. 5, 2011, by Standard & Poor’s, which cited political wrangling as among the factors for its decision. Europe’s common currency may decline in the short term to $1.25 and to $1.20 in about a year, Bennenbroek said.
The pound declined for a second day versus the dollar after an industry report showed U.K. services growth slowed more in October than economists forecast.
Sterling fell before the Bank of England holds a two-day meeting this week to decide whether to increase monetary stimulus through so-called quantitative easing.
“I’d be wary of further weakness,” said Michael Derks, chief strategist at FXPro Group Ltd. in London. “The hurdle for more QE is reasonably high.”
The U.K. currency dropped 0.3 percent to $1.5979 after falling to $1.5958, the lowest since Oct. 24. The pound was little changed at 80.08 pence per euro.
The krona strengthened against the euro after service production in the Scandinavian nation rose to 50.3 in October from a revised 47.2 the previous month. A reading above 50 signals an expansion.
The krona rose 0.5 percent to 8.5623 per euro. Sweden’s currency gained 0.2 percent to 6.6913 per dollar.
The Turkish lira strengthened after the nation received its first investment-grade ranking since 1994. Fitch Ratings raised the country by one level to BBB-, citing an easing in economic risk and lower government debt.
The lira climbed 0.6 percent to 1.7815 per dollar, and gained 0.9 percent to 2.2799 against the euro. It has risen for 10 days versus the euro, the longest streak since the single currency was introduced in 1999.
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