- The euro headed for a fourth weekly decline, breaking through the 14-month low reached against the dollar last week, on concern European nations’ debt-cutting measures will undermine economic growth.
The 16-nation currency touched the least in a week versus the yen before Greece submits a progress report tomorrow to the European Commission on the implementation of a deficit-reduction plan. The yen gained versus all 16 of its major counterparts as Asian stocks and commodities fell, boosting demand for Japan’s currency as a refuge.
“The roots of the debt crisis in Europe have yet to be solved,” said Yoh Nihei, a Tokyo-based trading group manager at Tokai Tokyo Securities Co. “People have reservations about the effectiveness of the loan package. I remain negative on the euro from a long-term perspective.”
The euro was at $1.2527 as of 10:08 a.m. in Tokyo from $1.2535 in New York yesterday, after touching $1.2516, the lowest level since March 5, 2009. Europe’s currency traded at 116.16 yen from 116.27 yen. It earlier touched 115.88 yen, the lowest since May 7. The yen was at 92.70 per dollar from 92.75.
The Nikkei 225 Stock Average fell 1.9 percent and the MSCI Asia Pacific Index of regional shares slipped 1.2 percent. The Reuters/Jeffries CRB Index of 19 raw materials declined 0.4 percent yesterday.
Unprecedented Loan Package
Europe’s currency has fallen 1.8 percent this week after the region’s policy makers unveiled an unprecedented loan package worth almost $1 trillion to combat the sovereign-debt crisis that’s threatening the currency. European Central Bank governing council member Guy Quaden said yesterday the situation facing Greece is worse than in other European nations.
Greece has announced three rounds of deficit-reduction measures this year, including increases in sales tax and levies on fuel, alcohol and tobacco. It last week agreed to a new package including wage and pension cuts to qualify for 110 billion euros ($138 billion) in emergency loans from the EU and the International Monetary Fund.
“Investors are still concerned widespread fiscal tightening could derail the already weak European economic recovery,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “A test of the euro’s 2008 low of $1.2330 looks likely in coming sessions.”
Portugal, Spain
Portugal lowered its budget-deficit goal for 2011 to 4.6 percent and approved tax increases and spending cuts. The government maintained a 7.3 percent deficit target for 2010. Last year’s deficit was 9.4 percent of gross domestic product.
Spain this week announced plans to reduce the deficit to 6 percent of GDP in 2011 from 11.2 percent last year, the largest two-year cut since at least 1980. Trade union UGT will stage a one-day strike of public sector workers in June, Candido Mendez, general secretary of the union, said in Madrid yesterday.
“The euro grinds lower on continued pessimism regarding peripheral euro-zone countries,” analysts led by Marc Chandler, New York-based global head of currency strategy at Brown Brothers Harriman & Co., wrote in a research note dated today. “We remain negative on the euro.”
The euro has lost 8.5 percent this year, according to Bloomberg Correlation-Weighted Indexes. The dollar has gained 6.1 percent, and the yen has advanced 6.6 percent.
The dollar was poised to snap two weeks of declines against the yen before U.S. reports that may show retail sales rose for a seventh month and confidence among consumers improved in April, adding to signs the world’s largest economy is recovering.
U.S. Economy
“The outlook for the U.S. economy appears upbeat,” said Akane Vallery Uchida, a currency strategist at Royal Bank of Scotland Group Plc in Tokyo. “This will probably be a positive factor for the greenback.”
Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said yesterday the pledge to keep interest rates low for an “extended period” doesn’t stop the central bank from raising rates “if economic conditions change appropriately, whether that’s in three weeks, three months or three years.”
--With assistance from Craig Torres in Washington and Greg Quinn in Ottawa. Editors: Garfield Reynolds, Rocky Swift.we were dear to each other
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