Euro at One-Week Low Versus Dollar as Ministers Discuss Greece

By Lukanyo Mnyanda and Yasuhiko Seki

Jan. 18 (Bloomberg) -- The euro fell to a one-week low against the dollar amid speculation a meeting of European officials today won’t offer solutions to Greece’s deteriorating public finances.

Europe’s currency also slumped to the weakest level since December against the yen before finance ministers from the 16 nations that use the euro meet in Brussels. The pound rose to a four-month high against the euro as a report showed U.K. home sellers raised asking prices in January. New Zealand’s dollar fell after house prices fell for the first time in six months.

“It’s all about credibility and perceptions, and if there’s a building credibility gap on Greece, the euro will come under pressure,” said Jeremy Stretch, a senior currency strategist at Rabobank International in London. “The Greek finance minister will give a presentation, and the question is whether it will be perceived as credible.”

The euro traded at $1.4371 as of 9:34 a.m. in London from $1.4387 in New York last week, after dropping to $1.4335, the lowest level since Jan. 8. The currency was at 130.71 yen from 130.61 after falling to 130.09, the weakest since Dec. 22. The dollar bought 90.94 yen from 90.77 yen.

New Zealand’s dollar declined to 73.65 U.S. cents from 73.78 cents. The Korean won fell 0.1 percent to 1,124.60 per dollar.

The euro weakened last week after the European Commission said there were “severe irregularities” in data Greece used to calculate its deficit. The currency union “is not liable for member countries’ debt,” European Central Bank Executive Board member Juergen Stark said on German radio on Jan. 15.

U.S. Earnings

Greece’s worsening finances last month prompted Fitch Ratings, Moody’s Investors Service and Standard & Poor’s to cut the country’s creditworthiness, fuelling concern about a debt default. Moody’s said on Jan. 13 the Greek and Portuguese economies may face a “slow death” as they dedicate a higher proportion of their wealth to paying off debt.

“Greece might be the weakest link but the chain does not stop there,” Steven Barrow, head of Group-of-10 currency strategy at Standard Bank Group Plc in London, wrote in a note today. There is “little doubt that if Greece were to allay some market concerns with its budgetary policy, this would not be the end of the issue for the region and not the end of euro-zone spread divergence or euro weakness.”

Asian currencies declined alongside regional stock markets, with the Nikkei 225 Stock Average sliding 1.2 percent and the MSCI Asia Pacific Index of regional shares falling 0.4 percent. New Zealand’s dollar weakened after the Real Estate Institute of New Zealand Inc. said house prices fell 0.9 percent in December.

The pound strengthened to less than 88 pence per euro for the first time since Sept. 15 before trading at 88.02 pence. It climbed 0.5 percent to $1.6338.

Average asking house prices in England and Wales climbed 0.4 percent from the previous month, Rightmove Plc, the U.K.’s biggest property Web site, said today. From a year earlier, they increased 4.1 percent, leaving them 8.3 percent lower than the peak in May 2008.

The yen fell against the 16 major currencies after Bank of Japan Governor Masaaki Shirakawa said the central bank will persist with its policy of fighting deflation.

“The central bank is aiming to maintain an extremely accommodative financial environment,” Shirakawa said at a quarterly meeting of regional branch managers in Tokyo.

The central bank raised its economic assessment in four of the country’s nine regions.

“With an exit from credit easing still some way off in Japan, people feel most comfortable in selling the yen,” said Yousuke Hosokawa, a senior currency dealer in Tokyo at Chuo Mitsui Trust & Banking Co., a unit of Japan’s seventh-largest bank.

Forecasts for the euro, yen and Swiss franc from 61 Bloomberg survey contributors are within 9 cents of the mean on average, down from 11 cents a year ago. Strategists are more in sync than any time since the depths of the financial crisis, increasing incentives to bet against the yen after the carry trade lost money in December for the first time in 10 months.

The growing consensus signals that foreign-exchange swings will decline, luring investors to sell currencies from countries with lower interest rates to buy higher-yielding ones. That may weaken the yen and Swiss franc, and rein in the resurgent dollar.

To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Yasuhiko Seki in Tokyo at Yseki5@bloomberg.net