Euro Set for Biggest Weekly Decline in a Month

By Masaki Kondo - May 4, 2012 7:58 AM GMT+0700

The euro was set for the biggest weekly decline in a month amid concern leadership changes at elections in France and Greece this weekend could derail the region’s austerity efforts.

The 17-nation currency was 0.2 percent from an almost two- year low versus the British pound before a private report that may confirm the region’s output of services and manufacturing shrank for a third month. The Dollar Index was poised for a weekly gain before a U.S. data forecast to show employment increased last month in the world’s biggest economy.

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Newly-minted 2 cent euro coins fall into a container during manufacture at the Bank of Greece's Printing Works Department and Mint in Athens. Photographer: Simon Dawson/Bloomberg

“Markets are concerned about what new leaders will do,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. Euro demand may see “a more negative impact because of some uncertainties ahead.”

The euro was little changed at $1.3147 as of 8:48 a.m. in Singapore from the close in New York yesterday. It has lost 0.8 percent this week, the biggest slide since the period ended April 6. The common currency fell 0.1 percent to 105.40 yen. It was at 81.22 pence after falling to 81.03 yesterday, the lowest since June 2010. The dollar was little changed at 80.16 yen.

Japan’s markets are shut today for a public holiday.

France will have a presidential election and Greece will have parliamentary elections, both scheduled for May 6.

French President Nicolas Sarkozy and Socialist Francois Hollande wrap up their campaigns today. Hollande has called for a re-negotiation of the budget pact crafted by European leaders in March, saying it needs to place more emphasis on growth. He has rejected a Sarkozy plan to raise sales taxes to fund a cut in payroll charges.

Anti-Bailout Parties

In Greece, neither of two major political parties that have supported the nation’s international bailouts -- New Democracy and Socialist Pasok -- is likely to win an outright majority in the 300-seat parliament.

The French and Greek votes “add to the uncertainty” in the euro area, said Kurt Magnus, executive director of foreign- exchange sales in Sydney at Nomura Holdings Inc.

A euro-area composite index for services and manufacturing industries was at 47.4 in April, below the 50 level that indicates contraction, according to economist estimates before London-based Markit Economics releases its final reading today.

“Any downward revisions from the preliminary reading should maintain expectations for lower yields and a weaker euro,” BNP Paribas SA strategists, including Steven Saywell, head of foreign-exchange strategy for Europe, wrote in a research note referring to the European composite index. “As such we reiterate our euro-dollar call for $1.28 by the end of this quarter.”

The Dollar Index (DXY), which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, was little changed at 79.214 and has risen 0.7 percent since April 27.

U.S. employers added 160,000 jobs last month after a 120,000 increase in March, the median estimate of economists showed before the Labor Department report due today.

To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net