By Monami Yui and Masaki Kondo - Dec 14, 2011 10:01 AM GMT+0700
Dec. 14 (Bloomberg) -- Jason Brady, a managing director at Thornburg Investment Management Inc. in Santa Fe, New Mexico, talks about Europe's sovereign debt crisis, and its implications for global financial markets and Federal Reserve monetary policy. He speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
The euro traded 0.1 percent from an 11-month low as European nations prepare to sell bonds amid concern the region’s debt crisis is far from resolution.
The dollar gained against most of its 16 major counterparts after the Federal Reserve said the U.S. economy is maintaining its expansion and refrained from taking new action to lower borrowing costs, easing concern policy makers are devaluing the world’s reserve currency. The yen was near the highest level in more than two months versus the 17-nation euro as Asian equities dropped, boosting demand for safer assets.
“It’s hard to see a positive scenario for the euro,” said Kumiko Gervaise, an analyst in Tokyo at Gaitame.com Research Institute Ltd., a unit of Japan’s largest online currency margin-trading company. “A bad result at debt auctions will be a selling catalyst for the euro.”
The euro dipped 0.1 percent to $1.3026 as of 11:22 a.m. in Tokyo from yesterday in New York, when it touched $1.3009, the lowest since Jan. 12. The yen fetched 101.63 per euro from 101.68, after rising to 101.47 yesterday, the strongest since Oct. 4. The dollar was little changed at 78.02 yen.
The MSCI Asia Pacific Index (MXAP) of shares fell for a second day, sliding 0.6 percent. The Standard & Poor’s 500 Index lost 0.9 percent in New York yesterday after German Chancellor Angela Merkel rejected raising the upper limit of funding for Europe’s permanent bailout mechanism.
Merkel told coalition lawmakers that the 500 billion-euro ($651 billion) cap on Europe’s planned permanent fund will stay in place, two officials with knowledge of the discussion said.
Italy is scheduled to auction as much as 3 billion euros of debt maturing in 2016 today, while Germany plans to sell 5 billion euros of two-year notes. Spain will offer debt maturing in 2016, 2020, and 2021 tomorrow.
Fed Policy
“The economy has been expanding moderately, notwithstanding some apparent slowing in global growth,” the Federal Open Market Committee said in a statement at the conclusion of its meeting yesterday in Washington. “While indicators point to some improvement in overall labor market conditions, the unemployment rate remains elevated.”
Policy makers left unchanged their statement that economic conditions are likely to warrant “exceptionally low” interest rates “at least through mid-2013.” The central bank lowered its target overnight interest rate to a range of zero to 0.25 percent in December 2008.
‘Bright Signs’
Industrial production probably increased 0.1 percent last month, following a 0.7 percent gain in October, according to the median estimate of economists in a Bloomberg News survey before the data tomorrow. Gauges of manufacturing from the Fed Banks of Philadelphia and New York may also point to expansion within those regions, economists said before the figures are released this week.
“I’m bullish on the dollar,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp., a currency margin company. “We can see some bright signs for the U.S. economy.”
The dollar has appreciated 3.3 percent in the past month, the best performance among 10 currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro has fallen 1.8 percent and the yen has advanced 1.9 percent.
The Australian dollar was near a two-week low versus its U.S. counterpart after Reserve Bank Deputy Governor Ric Battellino said a European slowdown may weigh on the local economy.
“If the European economy were to slow markedly over the next year or so, Australia would be affected,” Battellino said in Sydney today. “It is also likely, however, that if that were to eventuate, the exchange rate of the Australian dollar would fall, as it has when global growth has weakened in the past.”
The so-called Aussie dropped 0.2 percent to $1.0002 after yesterday touching 99.80 U.S. cents, the lowest since Nov. 30.
To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net;
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.
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