Euro Retreats From 9-Month High on Ireland Budget, Weaker Data

The euro declined against the dollar and yen as investors sold bonds from so-called peripheral European countries amid concern that faltering economies will hamper efforts to plug national budget shortfalls.

The common currency retreated from a nine-month high against the dollar as reports showed German factory orders and European retail sales both unexpectedly fell, while Spain’s economy stagnated as austerity measures undermined the recovery. Ireland will push back the publication of a four-year plan to narrow its deficit, the Irish Times said. The Canadian dollar declined against its U.S. counterpart as the nation’s employers added fewer jobs than economists predicted.

“The euro has to take some notice of what is happening” in Europe’s periphery, said Jane Foley, a senior currency strategist at Rabobank International in London. “We could have choppy conditions for euro-dollar.”

The euro slid 0.6 percent to $1.4117 at 6:35 a.m. in New York, from $1.4207 yesterday, when it rose to its strongest level since Jan. 20. It’s still about 1 percent stronger this week. The 16-nation currency bought 113.99 yen compared with 114.71 yesterday, cutting its weekly advance to 1.7 percent. The dollar traded at 80.88 yen from 80.75 yen.

Spanish Spread

The extra yield investors demand to hold Spanish 10-year bonds instead of similar-maturity German securities surpassed 200 basis points and reached a three-month high, leading spread widening among peripheral bonds. The Irish spread widened four basis points to a record 532 basis points.

Retail sales in the euro region fell 0.2 percent from August, when they also slipped 0.2 percent, the European Union’s statistics office said today. Economists forecast a 0.1 percent gain, the median of 19 estimates in a Bloomberg survey showed.

German factory orders were hurt in September amid a slump in demand for investment goods, after big-ticket contracts inflated the previous month’s increase. Adjusted orders fell 4 percent from August, when they rose 3.5 percent, the Economy Ministry in Berlin said today. The median of 37 estimates in a Bloomberg economist survey was for a 0.4 percent gain.

UBS AG advised selling the euro against the Swiss franc, which is seen as a haven from financial turmoil, amid rising bond yields in Europe’s smaller economies.

Investors should bet the euro will weaken to 1.29 Swiss francs, and end the bet should it appreciate to 1.3870, Beat Siegenthaler, a currency strategist in Zurich, wrote in an investor note today.

Switzerland’s currency appreciated 0.7 percent to 1.3522 against the euro, pushing its gain this week to 1.3 percent. The franc rose against 14 of its 16 most-actively traded peers, advancing the most against the Swedish krona.

U.S. Jobs

Dollar gains may be limited before a report economists said will show unemployment held near 10 percent in October, adding to evidence the recovery is faltering.

The U.S. jobless rate was 9.6 percent for a third month, according to the median prediction of 80 economists surveyed by Bloomberg before today’s report. Unemployment has been at 9.5 percent or higher since August 2009, a record stretch of such elevated readings since monthly data began six decades ago. Payrolls likely rose by 60,000, the first gain since May, economists also predicted.

The dollar has declined this week as the Federal Reserve said it will buy $600 billion of bonds to boost the economy and described progress toward its objectives of full employment and stable prices as “disappointingly slow.” Policy makers had already cut interest rates almost to zero and bought $1.7 trillion in securities.

Demand for Euros

European Central Bank President Jean-Claude Trichet signaled yesterday that the bank intends to stick to its strategy of withdrawing stimulus, saying “non-standard measures are by definition temporary in nature.

“We still have an on-going demand for euros from reserve managers,” said Paul Bednarczyk, a strategist in London at 4Cast Ltd., a research company that counts central banks among its clients. “Over the next few weeks it’s hard to see any big turnaround in the negative dollar view.”

The Canadian currency, nicknamed the loonie, depreciated 0.5 percent to C$1.0068 per U.S. dollar. One Canadian dollar buys 99.42 U.S. cents.

Employment rose by 3,000 in October after a decline of 6,600 in September, Statistics Canada said today in Ottawa. The jobless rate declined to 7.9 percent from 8 percent as the labor force shrank. Economists forecast job growth of 15,000 and an 8 percent unemployment rate, according to the median estimates of 25 economists surveyed by Bloomberg News.