Euro Falls to Almost Nine-Month Low as Confidence SagsJohn Detrixhe
The euro fell to almost the weakest since November after investor confidence in Germany slumped to the lowest level since 2012, adding to concern Europe may be entering a Japanese-style deflationary spiral.
A gauge of the dollar was at almost the strongest since February as job openings rose to the highest level in more than 13 years before a report tomorrow forecast to show U.S. retail sales grew for a sixth month. German bund yields dropped toward 1 percent on bets the European Central Bank’s stimulus measures are insufficient to boost inflation. Ukraine’s hryvnia fell to a record low as turmoil with Russia deepened. New Zealand’s currency dropped after the housing market slowed.
“The German number today pointed to a weak purchasing-manager index reading coming our way and emphasized a headwind to the primary engine of Europe,” Brad Bechtel, managing director of Faros Trading LLC in Stamford, Connecticut, said in a phone interview. “In light of further sanctions that were recently announced on Russia, which impact the EU as well, all that’s painting a very bleak picture of the euro zone.”
The euro depreciated 0.1 percent to $1.3369 as of 5 p.m. New York time, after reaching $1.3333 on Aug. 6, the lowest since Nov. 8. The 18-nation shared currency was little changed at 136.72 yen. The U.S. dollar rose 0.1 percent to 102.26 yen after dropping to 101.51 on Aug. 8, the least since July 24.
Bechtel recommends betting on the dollar versus Japan’s currency, as “it can continue to rally off recent lows.”
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 developed-market peers, was little changed at 1,021.18. The gauge touched 1,024.67 on Aug. 6, matching the highest since Feb. 11.
The hryvnia dragged the currencies of emerging Europe lower as Ukraine refused to let a convoy of 280 trucks that Russia says are carrying humanitarian aid to cross into its territory, saying it doesn’t adhere to international rules.
Ukraine’s parliament approved a bill on imposing sanctions against Russian companies and people in the first reading today, following measures already taken by the U.S. and European Union. Russia responded last week by banning Ukrainian, American and EU food imports.
The hryvnia weakened as much as 6.9 percent to a record-low of 13.715 versus the dollar before paring the decline to 13.4. Its 8.2 percent month-to-date decline is most among all currencies tracked by Bloomberg.
Russia’s ruble slid 0.7 percent, while Turkey’s lira fell 0.5 percent and Poland’s zloty dropped 0.2 percent.
New Zealand’s currency dropped for a fourth day after a report from the nation’s Real Estate Institute showed annual home-price gains last month were the least since September 2012. The kiwi weakened 0.3 percent to 84.35 U.S. cents.
The euro fell after a report by the ZEW Center for European Economic Research today on its index of investor and analyst expectations in Germany, which aims to predict economic developments six months in advance. The gauge fell to 8.6 in August from 27.1 in July, while economists had forecast a decrease to 17, according to estimates in a Bloomberg News survey.
Retail PMI in Germany fell to 51.1 in July from 56.2 the prior month, while in the euro zone it declined to 47.6 from 50. A reading above 50 signals expansion, less than 50 a contraction.
The euro-area economy expanded 0.1 percent in the second quarter from the previous three months, down from 0.2 percent in the January to March period, a separate survey showed before the data are released on Aug. 14.
Data “suggest that conditions are slowing down pretty rapidly now in Europe,” Robert Sinche, a global strategist at Stamford, Connecticut-based brokerage Pierpont Securities LLC, said in an interview on Bloomberg Radio’s “Surveillance.” “There is decreasing degrees of freedom for the ECB -- they’ve pulled about as many conventional levers as they can.”
Investors are snapping up Europe’s benchmark securities even after the ECB President Mario Draghi cut the refinancing rate to a record, introduced a negative deposit rate and announced targeted lending in June.
“They are somewhat restricted on quantitative easing, as opposed to the Federal Reserve and the Bank of Japan,” Pierpont Securities’ Sinche said.
Benchmark 10-year bund yields were little changed at 1.06 percent after dropping to a record 1.023 percent on Aug. 8.
The dollar strengthened after the number of unfilled positions climbed by 94,000 to 4.67 million, the most since February 2001, from a revised 4.58 million in May, a report from the Labor Department showed today.
Economists predict data tomorrow will show U.S. retail sales increased 0.2 percent in July after a 0.2 percent advance the prior month.
There’s about a 79 percent chance the Fed will raise its benchmark interest rate, the target for overnight loans between banks, to at least 0.5 percent by October next year, futures trading shows.
“U.S. growth outlook has improved while the confidence data today suggests the opposite for the euro area,” said Valentin Marinov, head of European Group of 10 foreign-exchange strategy at Citigroup Inc. in London. “That highlighted the diverging paths of the Fed’s and the ECB’s rates policy.”