By Candice Zachariahs and Kristine Aquino - Jan 6, 2012 12:30 PM GMT+0700
The euro fell to a 15-month low versus the dollar on speculation declining consumer confidence and spending will make it harder for European leaders to contain the region’s sovereign-debt crisis.
The 17-nation currency was within 0.1 percent of its weakest level in 11 years against the yen as Spain and Italy prepare to sell debt next week after France’s borrowing costs rose at an auction yesterday. The dollar is set for a weekly gain versus the yen and euro before a U.S. report forecast to show employers added the most jobs in three months in December. The Dollar Index reached a one-year high.
“There’s not a huge amount of reasons to be wanting to own the euro at the moment,” said Chris Weston, an institutional trader at IG Markets in Melbourne. “The fundamentals point to a weaker euro.”
Europe’s common currency fell to $1.2764, its lowest level since September 2010, before trading at $1.2775 as of 2:20 p.m. in Tokyo, 0.1 percent below yesterday’s close in New York. The euro was at 98.66 yen from 98.63 yesterday, when it touched 98.48 yen, its weakest since December 2000. The dollar bought 77.23 yen from 77.12 yesterday and 76.91 on Dec. 30.
IntercontinentalExchange Inc.’s Dollar Index (DXY), which tracks the greenback against the currencies of six major U.S. trading partners, climbed as much as 0.2 percent to 81.062, the highest since January 2011.
European Outlook
The euro has dropped 1.5 percent against the dollar since Dec. 30, set for a fifth straight week of declines, the longest stretch since February 2010.
European consumer confidence dropped to the lowest in more than two years in December, economists predict the Brussels- based European Commission will confirm today. An index of household sentiment (EUCCEMU) in the single-currency area fell to minus 21.2 from minus 20.4 in November, according to the median estimate in a Bloomberg News survey before the report. That’s the lowest since August 2009.
Retail sales (RSSAEMUM) in the region dropped 0.4 percent in November following a 0.1 percent advance the previous month, a separate survey shows before the European Union’s statistics office in Luxembourg releases the data. Purchases decreased 0.9 percent from a year earlier, according to the poll.
The euro slid yesterday after France sold 10-year bonds at an average yield of 3.29 percent, compared with 3.18 percent at a sale on Dec. 1. The bid-to-cover ratio, or the number of bids received for each unit of debt sold, fell to 1.64 from 3.05. France’s credit outlook was lowered by Fitch Ratings on Dec. 16.
Spain is scheduled to sell bonds maturing in 2015 and 2016 on Jan. 12. Italy will auction notes the following day.
Merkel, Sarkozy Meeting
German Chancellor Angela Merkel will meet French President Nicolas Sarkozy on Jan. 9 in Berlin to talk about increasing fiscal coordination among euro area states ahead of the European Union leaders’ summit at the end of the month.
Japan’s Finance Minister Jun Azumi said he understands that the weakening of the euro against the yen will have a significant impact on companies that export their goods to the region. He spoke to reporters in Tokyo today.
Japan sold the nation’s currency three times last year as its continued strength threatened to derail an export-driven economic recovery.
The dollar rose against the euro and yen this week before data that may indicate the U.S. added jobs in December, a further sign that the world’s largest economy is recovering.
Dollar Strength
“The news coming from the U.S. has been OK,” said Derek Mumford, a Sydney-based director at Rochford Capital, a currency-risk management firm. “I think we’re seeing just generally some U.S. dollar strength, which is mainly reflected in the euro.”
Companies added 325,000 workers in December, the most in records going back to 2001, according to a private report yesterday from ADP Employer Services.
A government report today will probably show U.S. nonfarm payrolls swelled by 155,000 positions last month, compared with a gain of 120,000 in November, according to a Bloomberg survey. That would be the biggest increase since September. The jobless rate (USURTOT) probably rose to 8.7 percent from 8.6 percent in the same period, a separate poll shows.
The U.S. economy “is certainly still very vulnerable to outside shocks,” Rochford’s Mumford said. “The troubles in Europe won’t be settled in months. There’s no quick fix.”
The U.S. currency is also set to rise versus the majority of its most-traded counterparts this week as Asian stocks declined for a second day, boosting demand for safer assets.
The MSCI Asia Pacific Index (MXAP) slumped 1.4 percent after a 0.9 percent drop yesterday.
To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net
To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net
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