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Euro Heads for 4th Weekly Loss on Europe Debt Crisis; Won Rises

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Dec. 3 (Bloomberg) -- The euro headed for a fourth weekly decline against the dollar on speculation European Central Bank President Jean-Claude Trichet will today refrain from announcing new measures to combat the region’s debt crisis.

The single currency was poised for its longest run of weekly losses since May versus the greenback after Standard & Poor’s said it may cut Greece’s credit rating as proposed European Union rules threaten to hurt bondholders. South Korea’s won rose, headed for a weekly gain, as overseas investors boosted their holdings of the nation’s shares for a third day.

“The ECB’s measures do not fully address liquidity or solvency concerns that have damaged market sentiment,” said Yuki Sakasai, a currency strategist at Barclays Bank Plc in Tokyo. “We suspect this points to further euro weakness for the time being, although the chances of a sharp decline have been reduced by continued progress on sovereign issues.”

The euro traded at $1.3222 as of 6:41 a.m. in London from $1.3209 in New York yesterday, having declined 0.2 percent this week. The single currency was at 110.49 yen from 110.73 yen, down 0.8 percent this week. The yen was little changed at 83.58 per dollar from 83.82.

The euro was poised for a second weekly decline versus the yen after Trichet stopped short of announcing any new steps to contain Europe’s sovereign-debt crisis at the ECB’s monthly policy meeting yesterday in Frankfurt.

The central bank kept its benchmark interest rate at a record low of 1 percent and extended an emergency loan program to combat “acute” market tensions. Trichet will speak today at the central bank’s monthly news conference in Paris.

Markets ‘Disappointed’

“Hopes that ECB President Trichet would announce a step up in purchases of sovereign debt to stabilize these markets were disappointed,” John Kyriakopoulos, Sydney-based head of currency strategy at National Australia Bank Ltd., wrote in a research note today. “The euro dived to as low as $1.3060 from $1.3175 just before Trichet’s press conference.”

Concern Europe’s debt crisis will worsen has shifted to Portugal and Spain since Nov. 28, when the region’s governments gave Ireland an 85 billion-euro ($112 billion) rescue package.

Greece’s ‘BB+’ long-term sovereign rating was placed on “CreditWatch” with negative implications, S&P said in a statement yesterday from Madrid. The rating company said it was assessing credit implications of the so-called European Stability Mechanism that may govern European Union sovereign bonds beginning in July 2013.

Won Gains

The won strengthened for a third day as funds based abroad bought $373 million more Korean shares than they sold yesterday, the biggest net purchases in almost three weeks, exchange data show. The Kospi index of shares posted its highest close since Nov. 10 on optimism that tensions between North and South Korea are easing.

“We haven’t seen North Korean retaliation, which they pledged to do after the attack, and the lack of negative events let risk aversion subside,” said Dariusz Kowalczyk, senior economist at Credit Agricole CIB in Hong Kong. “Positive sentiment globally boosted appetite for risk assets like the Korean won.”

The won rose 0.9 percent to 1,138.55 per dollar, having advanced 1.9 percent this week.

Losses in the dollar were tempered as economists said a U.S. report today will show employers added workers for a second month. Employment increased by 150,000 in November, after rising 151,000 in October, according to a Bloomberg survey before today’s Labor Department report.

‘Payrolls to Improve’

“There are expectations for payrolls to improve, given recent U.S. data have gotten a bit better,” said Osao Iizuka, head of foreign-exchange trading at Sumitomo Trust & Banking Co., Ltd. in Tokyo. “With 10-year Treasury yields rising beyond the 3 percent level yesterday, this is positive for the dollar and negative for the yen.”

Treasuries fell yesterday, pushing the 10-year note yield above 3 percent for the first time since July. ADP Employer Services reported on Nov. 1 that employment increased by 93,000 last month, the most since November 2007.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners including the euro and yen, slid 0.1 percent to 80.189, set for a 0.2 drop this week.

To contact the reporter on this story: Monami Yui in Tokyo at myui1@bloomberg.net; Ron Harui in Tokyo at rharui@bloomberg.net.

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

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