The euro fell the most in two weeks against the dollar as concern the region’s leaders won’t agree on a solution to its debt crisis damped appetite for its assets.
The 17-nation currency retreated from almost the strongest level in nine months against the yen. Financing costs rose as Greece sold 1.625 billion euros ($2.3 billion) of treasury bills a day after having its credit rating cut by Moody’s Investors Service. The Norwegian krone declined against 15 of its 16 major peers as oil fell for the first time in three days.
“As we get closer to the results of the euro summit and you have these concerns lingering and spreads widening, you have these pent-up aggressions playing out,” said Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London. “Being overweight euros is probably not the most prudent decision.”
The shared currency declined 0.6 percent to $1.3881 at 10:26 a.m. in New York. It reached $1.4036 yesterday, the strongest level since Nov. 8. It was little changed at 114.84 yen after touching 116 on March 4, the highest since May 14. The dollar strengthened 0.6 percent to 82.73 yen.
Dollar Trend
IntercontinentalExchange Inc.’s Dollar Index, which tracks the greenback against currencies including the euro and yen, climbed for a second day, gaining 0.5 percent to 76.878.
The euro, which has risen 3.9 percent against the dollar this year, has struggled to extend its advance beyond $1.40 as European Union leaders clashed about how to deal with the sovereign-debt crisis that forced Ireland and Greece to seek financial aid last year. The 27-nation EU intends to approve a “comprehensive” package of measures at a March 24-25 summit in a bid to calm bond markets.
The yield on 10-year Greek debt jumped as much as 45 basis points to the most since before the euro was created in 1999, according to data compiled by Bloomberg. Greece sold the 26-week bills today to yield 4.75 percent, up from 4.64 percent the last time the securities were sold in February, the Athens-based Public Debt Management Agency said.
Portugal plans to sell up to 1 billion euros of September 2013 notes tomorrow, its second auction this year.
Austria opposes easing conditions of bailouts sought by Ireland and Greece, Chancellor Werner Faymann told reporters today in Vienna. The nation’s Finance Minister Josef Proell said he didn’t see “pressure from other EU countries” for a change.
ECB Watch
The euro climbed 1.2 percent in the past week, according to Bloomberg Correlation-Weighted Currency Indexes, which track the currencies of 10 developed nations, fueled by speculation that the European Central Bank may raise interest rates as early as next month to contain inflation.
“There are other issues than simply a more hawkish ECB,” said John McCarthy, director of currency trading at ING Groep NV in New York. “The implication of higher rates is also there. The last thing those countries need is higher interest rates.”
ECB council member Axel Weber said the bank has embarked on a normalization of interest rates and he doesn’t want to correct market speculation for as many as three quarter-point increases this year.
It was the intention of the ECB to bring forward market expectations and “I see no reason at this stage to signal any dissent with how markets priced future policies,” Weber told Bloomberg News in Frankfurt today when asked about investors pricing in an increase in the benchmark rate to 1.75 percent by the end of the year.
Krone Declines
Norway’s krone depreciated by 0.6 percent to 5.5866 per dollar and was little changed at 7.7569 against the euro.
Crude oil traded in New York fell 0.8 percent today as the Organization of Petroleum Exporting Countries discussed the possibility of boosting output, easing concern that supply shortages may be prolonged. It reached $106.95 yesterday, the most since September 2008.
New Zealand’s dollar advanced, halting a five-day loss, as a technical indicator showed its recent declines may have been excessive. The so-called kiwi rebounded from the weakest level since September against the yen as traders reduced their bets that the central bank will cut interest rates at its meeting this week.
The New Zealand dollar rose to 73.95 U.S. cents from 73.69 in New York yesterday, after falling to 73.39 on March 4, the weakest since Oct. 1. The kiwi gained to 61.19 yen from 60.60 yen yesterday, when it touched 60.35 yen, the weakest level since Sept. 9.
The pound reached a one-week low against the dollar and snapped a four-day decline versus the euro. Retail sales dropped 0.4 percent from January, when they gained 2.3 percent, a report from the British Retail Consortium and KPMG showed. Bank of England policy makers will maintain the U.K. interest rate at 0.5 percent on March 10, according to all 61 economists surveyed by Bloomberg News.
The pound was 0.3 percent lower at $1.6157, after touching $1.6166, the least since Feb. 28. It strengthened to 85.96 pence per euro from 86.21 pence, after reaching 86.36 pence, the weakest since Jan. 28.
To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
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