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Euro Futures – The euro declined to a two-week low versus the dollar after a report showed the region’s economy contracted last quarter, adding to signs the European debt crisis is hampering global growth.
The yen rose against all its major counterparts and gained for a fifth day against the 17-nation currency as 20 percent of Greece’s private creditors have agreed to debt restructuring. Australia’s dollar weakened for a third day after the central bank said there’s scope to cut interest rates. Norway’s krone and Canada’s dollar slumped as oil prices declined to a two-week low as the European Union offered to restart talks with Iran.
“Growth is lingering in the background because people are so focused on Greece and central-bank headlines, but when you look at it from a broader perspective, that is going to weigh on the euro,” said Eric Viloria, senior currency strategist for Gain Capital Group LLC in New York.
The euro slid 0.7 percent to $1.3122 at 12:02 p.m. in New York, after touching $1.3111, the lowest level since Feb. 16. The shared currency dropped 1.7 percent to 105.93 yen, extending its decline in the past week to 2 percent. The dollar slipped 1 percent to 80.73 yen.
The shared currency has been sold for six consecutive trading days, according to Bank of New York Mellon Corp.’s iFlow data. The pace of the outflows during the past four days has been twice as strong as the average for the past year, the data show.
“Investor mindset is such that they’re just shunning European-denominated assets,” said Samarjit Shankar, a managing director for the foreign-exchange group in Boston at BNY Mellon. “You see this spate of news flow coming out showing that leading policy makers around the world coming to terms with growth being at a premium.”
Norway’s krone fell against all its major counterparts and declined 1.5 percent to 5.6999 versus the dollar and weakened 0.7 percent to 7.4806 per euro. Canada’s dollar fell 0.7 percent to C$1.0016. Both oil-exporting nations had seen their currencies rally as the European Union said it would cease oil imports from Iran starting in July.
Crude oil declined as much as 2.5 percent to $104.61 a barrel in New York, the lowest since Feb. 21. Catherine Ashton, the EU foreign policy chief, offered negotiations with Iran on behalf of China, France, Germany, Russia, the U.K. and the U.S.
The euro has weakened 0.7 percent in the past week, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-nation currencies. The dollar has strengthened 2.1 percent, and the yen rose 1.8 percent.
The euro may decline to a six-week low versus the dollar if the shared currency closes below $1.3171, according to Citigroup Inc. The level is a support drawn from a trend line from the Jan. 13 and Feb. 16 lows, Tom Fitzpatrick, chief technical analyst at Citigroup in New York said.
Europe’s gross domestic product shrank 0.3 percent from the third quarter, the region’s statistics office said today, confirming an initial estimate published on Feb. 15. Exports fell 0.4 percent and household spending declined 0.4 percent. The ECB will keep its benchmark interest rate t a record low 1 percent on March 8, a Bloomberg News survey showed.
The euro dropped as Greece struggles to complete a bond exchange with private investors by March 8 in order to receive a 130 billion-euro ($171 billion) bailout.
The yen rose against the dollar for a second day as it rebounded from oversold levels for the first time in 13 days. Its 14-day relative strength index advanced above the 30 level, which indicates an asset may have declined too far, too quickly, for the first session since Feb. 16.
Demand for the Japanese currency was buoyed as the Standard & Poor’s 500 Index fell 1.4 percent and the MSCI World Index tumbled 2 percent.
The U.S. currency appreciated after Federal Reserve Bank of Dallas President Richard Fisher said investors should prepare for less U.S. monetary easing. Recent reports have highlighted that U.S. growth is broadening, with data yesterday showing service industries unexpectedly expanded last month at the fastest pace in a year.
“If the data continue to improve, however gradually, the markets should begin preparing themselves for the good Dr. Fed to wean them from their dependency rather than administer further dosage,” Fisher said yesterday in Dallas.
Intercontinental Exchange Inc.’s Dollar Index (DXY), used to track the greenback against the currencies of six major U.S. trading partners, gained 0.6 percent to 79.793.
The gauge may find it difficult to strengthen further without “clear euro-negative news,” according to Lloyds Bank Corporate Markets, citing trading patterns.
The Dollar Index last rose above 80 Feb. 16, when it reached 80.119, the highest level since Jan. 25.
Australia’s dollar fell to a five-week low after the central bank left its benchmark rate at 4.25 percent and reiterated it has scope to ease monetary policy if needed.
The Reserve Bank of Australia said in a statement that while current settings are “appropriate for the moment,” there is scope for easier policy if demand weakens “materially.”
“The RBA has kept an easing bias,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “The statement may have been more dovish than some people have expected. I see more downside to the Aussie.”
Australia’s dollar dropped 1.2 percent to $1.0545 after sliding to $1.0538, the lowest since Jan 30.
– With assistance from Keith Jenkins in London and Aki Ito in San Francisco. Editors: Paul Cox, Kenneth Pringle
- Allison Bennett and Catarina Saraiva in New York at Bloomberg.