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Euro Falls to 22-Month Low on German Growth, China Loans

Euro Set for Biggest Weekly Drop This Year on Growth Concerns
The euro is headed for its biggest weekly decline this year as signs that Europe’s debt crisis is damping growth curbed demand for the currency. Photographer: Simon Dawson/Bloomberg

The euro touched the weakest level against the dollar since July 2010 as German manufacturing data weakened and China said its biggest banks may fall short of loan targets.

Europe’s 17-nation currency has fallen more than 5 percent against the dollar and yen this month as a Greek opinion poll showed the anti-bailout party was gaining support for the June 17 election. The Dollar Index touched a 20-month high after three officials said loan demand from China’s biggest banks is drying up. New Zealand’s dollar rose against all 16 of its major counterparts as Moody’s Investors Service reaffirmed its AAA rating.

“It’s unwelcome development with German manufacturing, because typically that’s where you go looking for a silver lining in the euro,” said Andrew Wilkinson, chief economic strategist at Miller Tabak in New York. “The second quarter had delivered a shock to growth expectations globally.”

The euro fell 0.4 percent to $1.2532 at 5 p.m. New York time after touching $1.2516, the weakest since July 6, 2010. The shared currency declined 0.2 percent to 99.76 yen, after tumbling 1.4 percent yesterday. The dollar rose 0.2 percent to 79.60 yen.

A German index based on a survey of purchasing managers in the manufacturing industry declined to 45 this month from 46.2 in April, Markit Economics said today.

Greece’s Syriza party had 30 percent support for the election, according to a Public Issue poll presented on Athens-based Skai TV today. The party is opposed to implementing the nation’s international rescue even as the poll showed 85 percent of Greeks want to keep the euro.

China’s Banks

China’s loan shortfall would be the first in seven years, according an exclusive Bloomberg News report. A decline in lending in April and May means it’s likely the banks’ total new loans for 2012 will be about 7 trillion yuan ($1.1 billion), less than the government goal of 8 trillion yuan to 8.5 trillion yuan, said one Chinese bank official who declined to be identified

Higher-yielding currencies reversed losses after Italian Prime Minister Mario Monti said a majority of European Union leaders at a Brussels summit this week backed the idea of joint euro-area bonds.

Australia’s dollar rose 0.2 percent to 97.63 U.S. cents, after declining 0.4 percent. The Aussie fell to 96.90 U.S. cents yesterday, a six-month low.

New Zealand’s dollar gained 0.5 percent to 75.34 U.S. cents after falling 0.2 percent. The so-called kiwi’s gains were supported as Moody’s cited the government’s deficit and debt trajectories in affirming its AAA rating.

Taylor’s View

The Dollar Index rose 0.2 percent to 82.278, after touching 82.364, the strongest since Sept. 2010.

“I don’t think there is any reason to get bullish,” John Taylor, founder of currency-hedge fund FX Concepts LLC said in a Bloomberg TV interview on “Inside Track” with Sara Eisen. “We own a lot of dollars. We own them against the euro and almost everything. You own them because you don’t like the others.”

The Swiss franc weakened to its lowest level in two months against the euro amid speculation the central bank may take action to discourage investment in the nation through taxing deposits.

SNB spokeswoman Silvia Oppliger declined to comment on the Swiss franc exchange rate. Finance Ministry spokesman Roland Meier wouldn’t comment on the tax speculation.

The franc slid as much as 0.6 percent to 1.20766 per euro and finished little changed at 1.20140 per euro.

The euro fell 4.8 percent in the past six months, making it the worst performer among 10 developed-nation currencies, according to Bloomberg Correlation-Weighted Indexes. The dollar gained 1.2 percent and the yen fell 1.5 percent.

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