By Yoshiaki Nohara and Ron Harui
Oct. 1 (Bloomberg) -- The euro fell against the dollar on speculation finance ministers and central bankers will discuss the European currency’s strength at a Group of Seven meeting this week.
Europe’s single currency dropped versus 13 of its 16 major counterparts on prospects the euro region’s finance ministers and central bankers meeting today in Goteborg, Sweden will signal that currency gains are unwelcome. The yen fell against the dollar as economic reports from China and South Korea sparked demand for higher-yielding assets in emerging markets.
“The recent appreciation of the euro is beginning to bother policy makers in the eurozone, where deflationary pressure is strong,” said Takeshi Makita, a Tokyo-based economist at Japan Research Institute Ltd., a unit of Japan’s third-largest banking group Sumitomo Mitsui Financial Group Inc. “As the region’s economy will rely on exports to achieve a recovery, it’s natural for policymakers to start verbal intervention to stem a harmful rise of the euro.”
The euro declined to $1.4568 as of 8:01 a.m. in London from $1.4640 in New York yesterday. The 16-nation currency traded at 131.22 yen from 131.33 yen. The yen dropped to 90.07 per dollar from 89.70.
European Union Monetary Affairs Commissioner Joaquin Almunia said the Eurogroup will discuss the currency’s advance in preparation for Group of Seven meetings, Reuters reported. G- 7 finance chiefs are meeting in Istanbul this weekend.
The yen fell against 12 of its 16 major counterparts after a report today showed China’s Purchasing Managers’ Index gained to 54.3 in September from 54.0 in August. Markets in Hong Kong and China are closed for holidays.
China PMI
“The China PMI increase means that the global economy is set for a steady expansion,” said Tomoko Fujii, senior currency strategist at Bank of America Securities-Merrill Lynch in Tokyo.
South Korea’s government said overseas sales fell 6.6 percent from a year earlier in September, less than August’s 20.9 percent slide and the 10.5 percent decline forecast by economists in a Bloomberg survey. Confidence among local manufacturers is at a two-year high, according to a monthly survey published yesterday by the Bank of Korea.
“Solid data are brightening the economic outlook, improving risk appetite,” said Tetsuya Inoue, chief researcher for financial markets and technology studies at Nomura Research Institute. “As emerging-market currencies benefit, the yen is being sold somewhat.”
The dollar advanced against the yen after the Bank of Japan’s Tankan survey showed companies plan to deepen investment cuts, spurring a drop in Asian stocks and boosting demand for the relative safety of the U.S. currency.
Tankan Survey
Large businesses aim to cut spending 10.8 percent this year, more than the 9.4 percent planned three months ago, the central bank said in Tokyo today. Confidence at big manufacturers rose for a second quarter after plunging to a record low in March.
“It’s an unusual situation for large companies to plan cuts in capital spending,” said Masaaki Kanno, chief economist at JPMorgan Chase & Co. in Tokyo. “They can’t be confident about the medium- to long-term outlook due to the big gap in supply versus demand.”
The Nikkei 225 Stock Average slid 1.5 percent and the MSCI Asia-Pacific Index of regional shares dropped 1.2 percent. The dollar benefits from risk aversion because it is the world’s main reserve currency.
To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net
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