The euro fell versus the dollar as Luxembourg Prime Minister Jean-Claude Juncker said the 17-nation currency is “dangerously high” after climbing to the strongest level in 10 months against the greenback.
Europe’s shared currency also extended losses versus the yen after the remarks from Juncker, who leads the group of euro-area finance ministers. The yen gained earlier from almost the lowest against the euro since May 2011 after Japanese Economy Minister Akira Amari said an excessively weak currency may hurt imports and households. The Swiss franc slid to a 13-month low versus the euro.
“If the exchange rate is very high, that’s going to hurt trade and weigh on growth in the euro zone through trade channels,” Sireen Harajli, a foreign-exchange strategist in New York at Credit Agricole SA, said in a telephone interview.
The euro fell as much as 0.9 percent to $1.3264, the biggest intraday decline since Jan. 3, before trading at $1.3306 at 5 p.m. New York time, down 0.6 percent. It touched $1.3404 yesterday, the strongest level since Feb. 29.
The 17-nation currency tumbled as much as 1.8 percent to 117.60 yen before trading at 118.14 yen, down 1.3 percent. It reached 120.13 yesterday, the highest since May 2011. The Japanese currency appreciated 0.8 percent today to 88.79 to the greenback after weakening yesterday to 89.67, the least since June 2010.
“It was said last year that the euro zone was at risk of breaking, and I said last year that this won’t happen,” Juncker told an annual gathering of business leaders in Luxembourg. “The euro zone has become more stable after lots of efforts, some from me. The euro foreign-exchange rate is dangerously high,” Juncker said.
Norway’s krone and South Africa’s rand were the biggest losers among the dollar’s 16 most-traded counterparts.
The krone fell after central bank Deputy Governor Jan F. Qvigstad signaled a persistent strength in the currency would influence the bank’s next rate decision in March. It declined 1.2 percent to 5.5687 per dollar.
The rand slid after Anglo American Platinum said it will shut four shafts, putting 14,000 jobs at risk and fueling concern South Africa’s current-account deficit will widen. The currency dropped 1.4 percent to 8.8162 per dollar and touched 8.8246, the weakest since Dec. 4. Metals and other minerals accounted for 61 percent of South Africa’s exports in the first 11 months of 2012, according to government data.
The Swiss franc depreciated past 1.24 per euro for the first time since Dec. 7, 2011, as haven demand ebbed after European Central Bank President Mario Draghi said Jan. 10 the euro-area economy will slowly return to health in 2013. The currency fell 0.4 percent to 1.24 per euro and reached 1.2413.
The premium for three-month options granting the right to sell the franc versus the euro relative to those allowing for purchases surged to the most since at least 2003, as far back as Bloomberg tracks the data. The so-called risk reversal rate rose to as much as a 2.12 percentage-point premium for franc puts, from 1.78 yesterday and 0.87 a month ago. A put option gives the right, but not the obligation, to sell a currency.
The yen snapped a four-day losing streak against the dollar after Amari said Japan faces risks from any excessive decline in the yen, highlighting the limits on Prime Minister Shinzo Abe’s campaign to drive down the currency to spur growth and defeat deflation. While a weaker yen may help exporters, it also will cause higher import prices, Amari told reporters in Tokyo.
“The market is massively short yen because investors are convinced it will weaken further on the back of the government’s policy,” said Michael Derks, chief strategist at FxPro Financial Services Ltd. in London. “When positions are that extreme, a comment like that from Amari can really swing the market.” A short position is a bet an asset will decline.
The difference in the number of wagers by hedge funds and other large speculators on a decline in the yen versus those on a gain, known as net shorts, was 74,096 on Jan. 8, figures from the Washington-based Commodity Futures Trading Commission show. Net shorts totaled 30,447 on Nov. 16.
The Bank of Japan will review its 1 percent inflation goal at its policy meeting on Jan. 21-22. Abe has called for the target to be doubled.
Goldman Sachs Asset Management Chairman Jim O’Neill said the BOJ must show it’s serious about inflation targeting for the yen to weaken further.
“Classical indicators suggest it is oversold,” O’Neill said in an interview on “Bloomberg Surveillance” from London. The BOJ “has got to show its going to take this 2 percent inflation target seriously. Rather than just a goal, it has to be a target,” he said.
The yen slid 16 percent over the past six months, the most among the 10 developed-market currencies tracked by Bloomberg Correlation Weighted Indexes, as Abe was swept to power. The dollar fell 4.5 percent, and the euro rose 4.5 percent.
The dollar rose versus most major peers as investors sought safety amid bets a political showdown over the U.S. debt limit will hurt the economy. The limit was reached Dec. 31, and Treasury Secretary Timothy F. Geithner said yesterday measures he’s taking to avoid breaching it won’t work past each March.
Geithner warned of severe economic hardship should Congress fail to raise the ceiling, which lawmakers have increased or revised 79 times since 1960. President Barack Obama told Republicans in Congress not to use the need for an increase in the $16.4 trillion limit to force through new spending cuts.