Euro Slides for Seventh Week as Inflation Slows Before ECB MeetsRachel Evans
The euro slid for a seventh-week, the longest stretch in more than a decade, as a report showed gains in consumer prices in the region slowed this month.
The 18-nation currency fell to an almost one-year low versus the dollar as Goldman Sachs Group Inc. cut its outlook for the euro. European Central Bank officials meet Sept. 4 after ECB President Mario Draghi said Aug. 22 that inflation expectations in the region have fallen, fueling bets officials will add to monetary stimulus. Canada’s dollar touched a one-month high after a report showed its economy expanded at the fastest pace in three years. Russia’s ruble weakened to a record.
“Divergence is the way to look at it,” said Richard Cochinos, the head of Americas Group of 10 currency strategy at Citigroup Inc. in New York. “You are getting some very aggressive and what looks to be some very strong data out of the U.S. next week and that ultimately is really going to help differentiate the dollar, certainly against euro and yen where the central banks are expected to be neutral to dovish.”
The euro fell 0.4 percent to $1.3132 as of 5 p.m. in New York, down 0.8 percent this week in the longest stretch of weekly declines since December 1999. It reached the lowest level since Sept. 6, 2013.
The dollar gained 0.4 percent to 104.09 yen, the biggest increase since Aug. 20. Japan’s currency was little changed at 136.69 per euro. U.S. markets will be closed on Sept. 1 for Labor Day.
Brazil’s real has led gainers against the dollar this year, adding 5.6 percent, followed by the Australian dollar with a 4.7 percent advance. Sweden’s krona fell 7.9 percent, the biggest loser. The Norwegian krone has gained the most this month, rising 1.4 percent, while the euro has lost most ground, falling 1.9 percent.
Hedge funds and other large speculators increased bets on declines in the euro against the dollar to the most since July 2012. The difference in the number of wagers on a decline compared with those on a gain -- so-called net shorts -- was 150,657 on Aug. 26, compared with 138,825 on Aug. 12, according to data from the Washington-based Commodity Futures Trading Commission.
The Canadian currency appreciated as gross domestic product rose at a 3.1 percent annualized pace from April to June, Statistics Canada said in Ottawa, faster than the 2.7 percent economists forecast in a Bloomberg survey.
The Canadian dollar fell to C$1.0878 per dollar, after reaching the strongest level since July 29.
The ruble weakened to a record, the biggest loser of the day versus the dollar, amid concern Russia may face more sanctions as fighting intensifies in Ukraine.
An escalation of the conflict prompted calls by the European Union to threaten further penalties. U.S. President Barack Obama said yesterday Russia faces “more costs and consequences” for violating the sovereignty of its neighbor. Ukrainian President Petro Poroshenko called the offensive a “de facto” incursion by Russia.
The ruble depreciated 1 percent to 37.1235 against the dollar, after weakening to 37.2170.
Goldman Sachs revised its forecast for the euro, saying the recent slump against the dollar is the beginning of a long-term trend that will result in parity by the end of 2017. The bank cut its three-month estimate to $1.29 from $1.35 and its six-month forecast to $1.25 from $1.34, Robin Brooks, the New York-based chief currency strategist, wrote in a research note today.
Euro-area consumer prices rose 0.3 percent in August from a year earlier after a 0.4 percent increase in July, the European Union’s statistics office in Luxembourg said today. That’s the weakest rate since October 2009 and in line with the median forecast in a Bloomberg News survey. Unemployment remained at 11.5 percent in July, Eurostat said in a separate report.
The ECB seeks to keep inflation just below 2 percent.
“Global activity is not sufficiently robust to encourage inflationary pressures across either the globe or specifically the euro zone,” Andrew Wilkinson, chief market analyst at Interactive Brokers LLC, said in a phone interview from Greenwich, Connecticut. “The euro’s fate is tied directly to the prospect of quantitative easing from the ECB.”
The U.S. currency gained versus the yen even as a report showed weaker than forecast personal spending and income in the world’s largest economy. Spending contracted 0.1 percent in July, missing the 0.2 percent gain predicted by analysts.
The U.S. economy however expanded more than initially estimated, data published yesterday showed. A report next week is forecast to show employers added more than 200,000 jobs for a seventh straight month.
The dollar has gained 1.2 percent in the past month, according to Bloomberg Correlation-Weighted Indexes. The yen has slipped 0.9 percent while the euro has dropped 1.1 percent.