Euro Declines to 11-Week Low Versus Dollar on ECB Bets

The euro fell to the lowest level in 11 weeks versus the dollar and yen after European Central Bank Vice President Vitor Constancio said policy makers are prepared to add further monetary stimulus if needed.

The 18-nation currency dropped versus most of its 16 major peers as a report showed growth in the euro-area fell short of analyst estimates after ECB President Mario Draghi said last week policy makers would be comfortable adding stimulus in June. India’s rupee rallied to the highest in more than nine months before election results. The yen rose for a second day as economic growth topped forecasts while a measure of volatility rose to a one-week high.

“We acknowledge it’s a close call in June, there’s a lot that can happen in terms of price action,” Robert Lynch, a currency strategist at HSBC Holdings Plc in New York, said in a phone interview. “If euro-dollar continues to move lower and turns out there’s no policy easing,” there’ll be a rebound in the single currency.

The euro fell 0.1 percent to $1.3696 at 10:23 a.m. New York time, after weakening to $1.3648, the lowest level since Feb. 27. The shared currency dropped 0.4 percent to 139.20 yen after sliding to 138.98, also the least since Feb. 27. The yen fell climbed 0.3 percent to 101.65 per dollar.

Price Swings

JPMorgan Chase & Co.’s Global FX Volatility Index rose to 6.48 percent. It fell to 6.21 percent on May 9, the lowest level since 2007.

India’s rupee climbed 0.6 percent to 59.29 per dollar on optimism that general election results to be announced tomorrow will show a clear winner, allowing for stable economic growth. It touched 59.0950, the strongest level since July 29.

The opposition Bharatiya Janata Party and its allies probably won 249 to 340 parliamentary seats, according to six exit polls, with 272 needed for a majority. The ruling Congress and its partners got between 70 and 148 places, the surveys showed. The rupee’s rise was limited on speculation the Reserve Bank of India bought dollars, according to three traders who asked not to be identified.

Brazil’s retail sales slid 1.1 percent in March from a year earlier, the biggest decline in a decade. While economists raised their 2014 median growth forecast to 1.69 percent in a central bank survey published May 12, the projected pace is still slower than last year’s 2.28 percent expansion.

Brazil Economy

“The economy seems to be slowing from what is already a very low base,” Eduardo Suarez, a Latin America foreign-exchange strategist at Bank of Nova Scotia, said in a telephone interview from Toronto.

Brazil’s real dropped 0.7 percent to 2.2180 per dollar after rising yesterday to 2.2023, the strongest level since April 9.

The yen strengthened versus most of its 16 major counterparts as Japan’s economy grew an annualized 5.9 percent from the last quarter, the fastest pace since 2011 as companies stepped up investment and consumers splurged before the first sales-tax rise in 17 years last month.

ECB policy makers have “reaffirmed our forward guidance and stressed that we are determined to act swiftly if required and do not rule out further monetary policy easing,” Constancio said in a speech in Berlin. Looser monetary policy tends to weaken currencies as lower interest rates diminish the allure of assets.

European Outlook

Euro-area gross domestic product rose 0.2 percent in the three months through March, half as much as economists forecast and matching growth in the fourth quarter. That may add to pressure on the ECB to deliver stimulus measures next month in its battle against weak inflation and anemic output.

“Since last week there’s been a number of comments suggesting the ECB are open to more easing measures if need be,” said Kiran Kowshik, a currency strategist at BNP Paribas SA in London. “Markets were surprised by how dovish Draghi was. The euro is getting hit because investor positioning has been largely neutral in recent months and is catching up.”

Consumer prices in the currency bloc rose 0.7 percent in April from a year earlier, a separate report showed, matching an initial estimate from April 30.

The euro has weakened 1.1 percent in the past month, the worst performer behind the franc among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen and the dollar gained 0.2 percent, the indexes show.

Swiss Prices

Switzerland’s producer prices fell 1.2 percent in April from a year earlier, a report showed today, compared to a 0.7 percent drop in March. Economists in a Bloomberg News survey forecast a 0.8 percent decline.

The franc depreciated 0.2 percent to 89.16 centimes per dollar after touching 89.60 centimes, the weakest level since Feb. 13.

Federal Reserve Chair Janet Yellen is due to address the U.S. Chamber of Commerce in Washington today. She said in testimony to lawmakers last week the recovery is uneven and the economy still requires support. While data show “solid growth” in the second quarter, “many Americans who want a job are still unemployed” and inflation remains slow, she said.

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, rose 0.1 percent to 1,009.52 after touching 1,011.43, the highest since May 2.

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