By Candice Zachariahs and Masaki Kondo - Dec 20, 2011 8:27 AM GMT+0700
The euro traded 0.5 percent from an 11-month low before Spain sells securities and the release of a German report forecast to show deteriorating business confidence in Europe’s largest economy.
The dollar maintained yesterday’s advance against most major counterparts amid signs it will be difficult for the euro region to attract outside funds to address its sovereign debt crisis. Australia’s dollar rose after the Reserve Bank said in minutes of its Dec. 6 meeting that investment in the domestic economy and “solid growth” among the nation’s main trading partners had tempered the need for lower interest rates.
“The market is still fearful of some big refunding tasks in the first quarter of next year,” said Greg Gibbs, a foreign- exchange strategist at Royal Bank of Scotland Group Plc in Sydney. “The euro has made successive new lows this year, so the technical pattern is still negative for the euro.”
The euro traded at $1.3007 as of 10:08 a.m. in Tokyo from $1.2998 in New York yesterday, after falling as low as $1.2946 on Dec. 14, the least since Jan. 11. Europe’s common currency fetched 101.50 yen from 101.45 yesterday. The dollar traded at 78.04 yen from 78.05.
Spain is due to auction three- and six-month securities today. Euro-region governments have to repay more than 1.1 trillion euros ($1.4 trillion) of long- and short-term debt in 2012, according to Bloomberg data. Italy and Spain have about 146 billion euros of bonds and bills maturing in the first quarter, the data show.
IMF Funds
Euro-area governments yesterday said they will boost their anti-crisis efforts by pledging to provide 150 billion euros to the International Monetary Fund. Four countries not using the single currency also agreed to add to the IMF war chest while Britain refused to commit funds, a sign of the difficulty of attracting outside cash to ease the euro area’s debt burdens.
The euro may drop to the weakest level in almost a year and a half after breaking through its low from October, according to Bank of America Corp.
The shared currency is poised to fall to as low as $1.2510, a level last reached in July 2010, after trading below $1.3146, the lowest reached in October, said MacNeil Curry, head of foreign-exchange and interest-rates technical strategy at Bank of America in New York. The shared currency would have to reach and break through the $1.2901-$1.2859 range before dropping to $1.2533 and then the lower level, he said.
The 17-nation European currency depreciated 2.8 percent versus the dollar this year and 6.4 percent against the yen. The dollar has dropped 3.8 percent versus the Japanese currency.
German Confidence
German business confidence may have weakened in December for the fifth time in six months. The Munich-based Ifo institute’s business climate index, based on a survey of 7,000 executives, probably fell to 106 from 106.6 in November, according to the median estimate of economists in a Bloomberg News survey before the data is released today.
The Australian dollar gained against most of its major peers after the nation’s central bank said it lowered rates this month because risks to global growth from Europe’s debt crisis overshadowed evidence the nation’s mining boom is intensifying, according to minutes of the meeting released today.
“It’s the offshore economy rather than the local economy which was the reason why the RBA cut rates,” said Richard Grace, chief currency strategist in Sydney at Commonwealth Bank of Australia. The minutes “suggest that they’re not going to be in a hurry to cut rates in the near future,” which is supporting the currency, he said.
The Australian dollar rose 0.3 percent to 99.26 U.S. cents and gained 0.3 percent to 77.46 yen.
To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@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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