The euro dropped to a seven-week low versus the dollar as Greece moved closer to defaulting on its obligations, bolstering concern the region’s sovereign-debt crisis is worsening.
The yen reached its strongest level versus the euro since the Group of Seven nations intervened in March to curb its gains after a record earthquake. Greece’s debt rating was cut by Fitch Ratings. Spanish voters may defeat Prime Minister Jose Luis Rodriguez Zapatero’s Socialists, who have cut spending to fight the debt crisis, in regional elections Sunday, polls show.
“The European debt markets are particularly unsettled at this point, and any unsettling headlines certainly have the potential to hurt the euro,” said Nick Bennenbroek, head of currency strategy at Wells Fargo & Co. in New York. “Policy makers do appear to be fairly resistant to any kind of change in the terms or conditions surrounding Greek debt. It’s negative for the euro.”
Europe’s shared currency fell 1 percent yesterday to $1.4161 and touched $1.4048 on May 16, the lowest since March 29. On the week, it gained 0.3 percent, from $1.4119 on May 13. The euro slid to 113.42 yen on May 16, the lowest level since March 18. It rose 1.4 percent over the past five days to 115.69 yen in its first weekly advance this month. The dollar strengthened 1.1 percent to 81.70 yen, from 80.80 on May 13.
Currencies of commodity-exporting countries including South Africa and Brazil rose as the Thomson Reuters/Jefferies CRB Index of 19 raw materials increased 0.9 percent.
Greek Bonds Unacceptable
The euro’s weekly gain was cut yesterday after Bundesbank President Jens Weidmann, a member of the European Central Bank Governing Council, said the ECB may not be able to accept Greece’s sovereign debt as collateral if the bond maturities are extended. The remarks added to signs of a division between policy makers and politicians on Greek debt.
European political leaders this week floated the idea of extending the Mediterranean nation’s debt-repayment schedule as it struggles to meet the terms of last year’s 110 billion euro ($157 billion) rescue package.
“A prolongation of Greek government bonds in an environment of prevailing strong doubts about the sustainability of public finances would make it impossible to accept them as collateral for refinancing operations under the existing rules,” Weidmann said at a conference in Hamburg. “Consequently large parts of the Greek financial sector would be cut off from funding.”
‘Default Event’
Fitch Ratings cut Greece’s long-term debt rating yesterday to B+, four notches below investment grade, and said even a voluntary extension of the bond maturities would be “a default event.” Greek 10-year yields surged to a record 16.6 percent.
The elections in Spain will take place in 13 regions accounting for 60 percent of the economy and more than 8,000 municipalities. Polls show the Socialists will likely be defeated in most regions.
Investors have speculated Spain might follow Portugal, Ireland and Greece in needing a financial rescue as the euro region’s debt crisis spreads. Demonstrations against budget cuts and bank bailouts have marked the run-up to the vote, which takes place a year before polls to choose Zapatero’s successor.
The yen was the worst performer against major currencies this week as Japan slid into its third recession in a decade and Prime Minister Naoto Kan said he expects the central bank to maintain a flexible monetary policy.
Gross domestic product in Japan contracted an annualized 3.7 percent in the first quarter, following a 3 percent drop in the fourth, the Cabinet Office said May 19 in Tokyo.
‘Death Knell’
“The fact that Japan is officially in a recession again is the death knell for the yen,” said Paresh Upadhyaya, Americas G- 10 currency-strategy head at Bank of America Corp. in New York.
The Bank of Japan’s policy board unanimously voted yesterday to maintain monetary policy even after the GDP data. It has a 30-trillion yen ($370 billion) credit program and a 10- trillion yen asset-purchase fund. The board also kept the key interest rate at zero to 0.1 percent.
South Africa’s rand was the second-best performer against the greenback, strengthening 1.5 percent to 6.9147. Brazil’s real rose 0.8 percent to 1.6228 per dollar. Both nations export raw materials.
The Swiss franc was the best performer against the euro, climbing 1.4 percent to 1.2425 and touching 1.2403, the strongest level since Dec. 30. Swiss Economy Minister Johann Schneider-Ammann said the government and central bank will consider taking “appropriate” measures should it keep rising.
Fed Strategy
The dollar fell versus most peers as minutes of the Federal Reserve’s meeting on April 26-27 showed that while officials began to coalesce on a strategy to reverse record monetary stimulus, no action is imminent.
Almost all officials agreed the “first step toward normalization” should be ceasing reinvestment of principal payments on mortgage debt, the minutes showed. Raising interest rates would come later. Talks over the exit strategy don’t mean tightening “would necessarily begin soon,” the minutes said.
“Investors are coming back to the realization they want to sell the dollar, and there is very little reason to own it because the Federal Reserve is going to be on hold,” said Kathy Lien, currency research director at online currency trader GFT Forex in New York.
Source: www.bloomberg.com
The yen reached its strongest level versus the euro since the Group of Seven nations intervened in March to curb its gains after a record earthquake. Greece’s debt rating was cut by Fitch Ratings. Spanish voters may defeat Prime Minister Jose Luis Rodriguez Zapatero’s Socialists, who have cut spending to fight the debt crisis, in regional elections Sunday, polls show.
“The European debt markets are particularly unsettled at this point, and any unsettling headlines certainly have the potential to hurt the euro,” said Nick Bennenbroek, head of currency strategy at Wells Fargo & Co. in New York. “Policy makers do appear to be fairly resistant to any kind of change in the terms or conditions surrounding Greek debt. It’s negative for the euro.”
Europe’s shared currency fell 1 percent yesterday to $1.4161 and touched $1.4048 on May 16, the lowest since March 29. On the week, it gained 0.3 percent, from $1.4119 on May 13. The euro slid to 113.42 yen on May 16, the lowest level since March 18. It rose 1.4 percent over the past five days to 115.69 yen in its first weekly advance this month. The dollar strengthened 1.1 percent to 81.70 yen, from 80.80 on May 13.
Currencies of commodity-exporting countries including South Africa and Brazil rose as the Thomson Reuters/Jefferies CRB Index of 19 raw materials increased 0.9 percent.
Greek Bonds Unacceptable
The euro’s weekly gain was cut yesterday after Bundesbank President Jens Weidmann, a member of the European Central Bank Governing Council, said the ECB may not be able to accept Greece’s sovereign debt as collateral if the bond maturities are extended. The remarks added to signs of a division between policy makers and politicians on Greek debt.
European political leaders this week floated the idea of extending the Mediterranean nation’s debt-repayment schedule as it struggles to meet the terms of last year’s 110 billion euro ($157 billion) rescue package.
“A prolongation of Greek government bonds in an environment of prevailing strong doubts about the sustainability of public finances would make it impossible to accept them as collateral for refinancing operations under the existing rules,” Weidmann said at a conference in Hamburg. “Consequently large parts of the Greek financial sector would be cut off from funding.”
‘Default Event’
Fitch Ratings cut Greece’s long-term debt rating yesterday to B+, four notches below investment grade, and said even a voluntary extension of the bond maturities would be “a default event.” Greek 10-year yields surged to a record 16.6 percent.
The elections in Spain will take place in 13 regions accounting for 60 percent of the economy and more than 8,000 municipalities. Polls show the Socialists will likely be defeated in most regions.
Investors have speculated Spain might follow Portugal, Ireland and Greece in needing a financial rescue as the euro region’s debt crisis spreads. Demonstrations against budget cuts and bank bailouts have marked the run-up to the vote, which takes place a year before polls to choose Zapatero’s successor.
The yen was the worst performer against major currencies this week as Japan slid into its third recession in a decade and Prime Minister Naoto Kan said he expects the central bank to maintain a flexible monetary policy.
Gross domestic product in Japan contracted an annualized 3.7 percent in the first quarter, following a 3 percent drop in the fourth, the Cabinet Office said May 19 in Tokyo.
‘Death Knell’
“The fact that Japan is officially in a recession again is the death knell for the yen,” said Paresh Upadhyaya, Americas G- 10 currency-strategy head at Bank of America Corp. in New York.
The Bank of Japan’s policy board unanimously voted yesterday to maintain monetary policy even after the GDP data. It has a 30-trillion yen ($370 billion) credit program and a 10- trillion yen asset-purchase fund. The board also kept the key interest rate at zero to 0.1 percent.
South Africa’s rand was the second-best performer against the greenback, strengthening 1.5 percent to 6.9147. Brazil’s real rose 0.8 percent to 1.6228 per dollar. Both nations export raw materials.
The Swiss franc was the best performer against the euro, climbing 1.4 percent to 1.2425 and touching 1.2403, the strongest level since Dec. 30. Swiss Economy Minister Johann Schneider-Ammann said the government and central bank will consider taking “appropriate” measures should it keep rising.
Fed Strategy
The dollar fell versus most peers as minutes of the Federal Reserve’s meeting on April 26-27 showed that while officials began to coalesce on a strategy to reverse record monetary stimulus, no action is imminent.
Almost all officials agreed the “first step toward normalization” should be ceasing reinvestment of principal payments on mortgage debt, the minutes showed. Raising interest rates would come later. Talks over the exit strategy don’t mean tightening “would necessarily begin soon,” the minutes said.
“Investors are coming back to the realization they want to sell the dollar, and there is very little reason to own it because the Federal Reserve is going to be on hold,” said Kathy Lien, currency research director at online currency trader GFT Forex in New York.
Source: www.bloomberg.com
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