The euro rose from a one-week low against the dollar after failing to fall below its 200-day moving average.
The 17-nation currency pared its advance after Standard & Poor’s cut Spain’s debt rating to one level above junk. The euro declined earlier after meetings of European finance ministers this week failed to reassure investors the euro region’s sovereign-debt crisis will be contained. South Africa’s rand climbed for a second day as transport-union members returned to work after a strike.
“It’s more market participants driving it, not really the fundamentals, which basically point to a downward-euro trend,” said Alfonso Esparza, senior currency analyst in Toronto at the online currency-trading firm Oanda Corp.
Europe’s shared currency rose as much as 0.2 percent to $1.2914 after earlier falling to $1.2835, the lowest level since Oct. 1. It closed at $1.2875 at 5 p.m. in New York after the Spanish rate cut. The euro’s 200-day moving average is $1.2823. The level is seen by some traders as a barrier to further decreases.
The euro fell 0.2 percent to 100.66 yen, after sliding earlier to 100.44 yen, also the least since Oct. 1. Japan’s currency gained 0.1 percent to 78.19 per dollar.
S&P cited mounting economic and political risks as it lowered Spain’s debt rating two levels to BBB- from BBB+.
European finance ministers meeting in Luxembourg this week saluted Greece’s determination to trim its budget. The region’s crisis began in the nation three years ago. Ministers paired the encouragement with a demand that Greece commit to a list of 89 policy steps before an Oct. 18-19 leaders’ summit.
The euro closed at a four-month high of $1.3130 on Sept. 14, the day after the Federal Reserve announced a third round of asset purchases under the quantitative-easing stimulus strategy. The U.S. central bank said it would buy $40 billion of mortgage bonds a month until the economic recovery is well-established.
The European Central Bank announced an unlimited bond-purchase program for euro-bloc governments on Sept. 6 to stem the region’s debt turmoil.
The shared currency has traded this week between $1.2835 and $1.3049.
“There’s not been any news,” Kit Juckes, head of foreign-exchange research at Societe Generale SA in London, said in a telephone interview. “In a sense, this is a permanent war between bad news in Europe and globally and desire not to fight the Fed and central banks and their money printing.”
The 17-nation currency gained earlier after a Fed regional business survey said the U.S. economy expanded “modestly” last month. The Fed’s Beige Book business survey said expansion in the U.S. economy last month was supported by improvements in housing and auto sales, even as the labor market showed little change.
“Consumer spending was generally reported to be flat to up slightly since the last report,” the Fed said in the survey, which is based on accounts from the 12 district Fed banks. Conditions in manufacturing were “somewhat improved,” according to the report, which provides anecdotal evidence on the health of the economy two weeks before the Federal Open Market Committee meets in Washington on Oct. 23-24.
The euro fell earlier after the International Monetary Fund said Europe’s banks may need to sell more assets through 2013 if policy makers fail to stem the fiscal crisis.
Failure to implement fiscal tightening or set up a single supervisory system in the timing agreed could force 58 European Union banks from UniCredit SpA to Deutsche Bank AG to shrink assets by as much as $4.5 trillion, the IMF said in its Global Financial Stability Report. That’s up 18 percent from its April estimate.
The euro rose 0.6 percent over the past month against nine industrial-nation counterparts tracked by Bloomberg Correlation-Weighted Indexes. The dollar gained 0.5 percent, and the yen slipped 0.2 percent.
The IMF also lowered its growth forecasts this week. The world economy will expand 3.3 percent this year, the slowest pace since the 2009 recession, versus the July forecast of 3.5 percent, the Washington-based organization said in a report. The euro region’s economy will contract 0.4 percent in 2012, 0.1 percentage point less than forecast in July, and grow 0.2 percent in 2013, versus 0.7 percent predicted earlier, it said.
Mexico’s peso and the Indian rupee were among the worst-performing currencies among 31 major peers of the greenback.
The rupee declined for a fourth day, dropping 0.6 percent to 53.059 per dollar. S&P said the nation may lose its investment-grade credit rating if economic growth slows and political opposition to policy changes increases.
The Mexican currency sank after the IMF lowered its growth forecast for Latin America and the Caribbean area for 2012 and 2013. The currency depreciated 0.8 percent to 12.9774 per dollar after losing as much as 0.8 percent yesterday, the most in more than two weeks.
The peso may strengthen to its highest level versus the U.S. dollar in more than a year following a corrective phase, according to JPMorgan Chase & Co., citing oversold and diverging momentum measures.
The currency may depreciate to the range of 12.91 to 12.95 per dollar before weakening to 13 in the short term, Niall O’Connor, a New York-based technical analyst at JPMorgan, wrote today in a note to clients. It then may bounce off that level and gain to 12.55 to the greenback, the strongest since September 2011, O’Connor said.
The rand rose against most of its 16 major counterparts tracked by Bloomberg, gaining as much as 0.4 percent to 8.7882 per dollar before trading at 8.7453, up 0.1 percent.
The South African currency weakened 6 percent in four days of losses through Oct. 8 as strikes in the country’s mining and transportation industries spread to other areas of the economy.