Euro Near 2-Year Low : because of production shrank in France and Italy
Euro Near 2-Year Low : because of production shrank in France and
Italy
The
euro declined to within 0.4 percent of its lowest level in two years,
before reports forecast to show industrial production shrank in France
and Italy as Europe’s debt crisis undermines growth.
The
17-nation currency was 0.4 percent from a one-month low against the yen
after European Union Economic and Monetary Affairs Commissioner Olli
Rehn said Spain will have to take additional measures soon to meet
budget targets. The dollar strengthened versus most of its 16 major
peers as Asian stocks declined. The Australian and New Zealand
currencies dropped after data showed growth in exports and imports
slowed in China.
“The
euro is going to stay quite weak, particularly against the U.S. dollar
and the yen,” said Joseph Capurso, a strategist in Sydney at
Commonwealth Bank of Australia (CBA), the nation’s biggest lender. “The
euro zone is still in recession and it’s probably getting even deeper.”
The
euro lost 0.2 percent to $1.2286 as of 1:03 p.m. in Tokyo after sliding
to as low as $1.2251 yesterday, the weakest since July 2010. The shared
currency fell 0.3 percent to 97.69 yen from 97.95 yesterday, when it
touched 97.43, the lowest since June 5.
The
dollar was little changed at 79.51 yen. The so-called Aussie dropped
0.4 percent to $1.0165, while the New Zealand currency weakened 0.4
percent to 79.34 U.S. cents.
The MSCI Asia Pacific Index (MXAP) of shares declined 0.4 percent.
Production Reports
Industrial
production in France probably dropped 1 percent in May from the
previous month, when it climbed 1.5 percent, according to the median
estimate in a Bloomberg News survey before Paris-based national
statistics office Insee releases the report today.
A
separate poll showed industrial output in Italy may have fallen 0.6
percent in the same period after weakening 1.9 percent in April. The
figures are also due today. Production in the euro area probably stalled
in May after two straight months of decline, economists in another
forecast before the data is reported on July 12.
European
Central Bank President Mario Draghi signaled the bank may consider
another interest-rate cut if the economic outlook warrants it, when he
addressed lawmakers in Brussels yesterday. The ECB lowered the main
refinancing rate to a record 0.75 percent and cut the deposit rate to
zero on July 5.
The
possibility of additional reductions “is going to keep downward
pressure on euro,” CBA’s Capurso said. “There’s a good chance over the
next few months euro could get down to the lows we saw around $1.18.”
The currency touched a then four- year low of $1.1877 in June 2010,
according to data compiled by Bloomberg.
Spanish Yields
Rehn
said it’s “essential” that Spain meet its fiscal targets, speaking to
reporters at a briefing after a meeting of euro-area finance ministers
in Brussels, which included discussions on measures for the nation’s
lenders adopted by heads of government at a summit last month.
Ten-year
yields in Spain, which requested as much as 100 billion euros ($123
billion) of European aid last month for its banks, climbed 11 basis
points to 7.06 percent yesterday.
Thirty
billion euros will be lent by the end of July with the goal of
eventually using the euro-area bailout fund to recapitalize banks
directly instead of saddling the Spanish government with the debts,
Luxembourg Prime Minister Jean-Claude Juncker said today after the
finance ministers’ meeting.
The
euro has declined 2.3 percent in the past month, the worst performance
among the 10 developed-nation currencies tracked by Bloomberg
Correlation-Weighted Indexes. New Zealand’s dollar was the biggest
gainer, rising 3.1 percent in the same period. The Aussie advanced 2.6
percent.
The
South Pacific currencies weakened after a report from the customs
bureau showed China’s overseas shipments rose 11.3 percent in June from a
year earlier, after increasing 15.3 percent the prior month. Imports
grew by 6.3 percent, compared with a 12.7 percent gain in May.
China is Australia’s biggest trading partner and New Zealand’s second-largest export destination.
To
contact the reporters on this story: Kristine Aquino in Singapore at
kaquino1@bloomberg.net; Mariko Ishikawa in Tokyo at
mishikawa9@bloomberg.net