SymbolPriceChange3105.TWO29.30-0.10
* Euro on pace for worst week since early January
* Euro down sharply vs yen
* ECB executive board member Stark resigns
* Little expected from G7 communique
(Updates prices, adds quotes, byline)
NEW YORK (Xetra: A0DKRK – news) , Sept 9 (Reuters) – The euro fell to its lowest
in more than six months against the dollar on Friday as risk
aversion increased after news an ECB executive board member
will resign in protest over the bank’s bond-buying program.
Losses in the euro could accelerate in the coming weeks
given ongoing sovereign debt uncertainty and the European
Central Bank (Other OTC: CBSU.PK – news) ‘s shift to a neutral bias amid lower growth
forecasts. Money markets have consequently priced in a rate cut
from the ECB by year-end.
News of ECB Executive Board Member Juergen Stark’s
resignation over the bank’s purchases of peripheral bonds
caught most investors by surprise. The ECB has been buying
government debt of highly-indebted euro countries such as
Italy, Spain, and Portugal to help shore up these nations’
finances. For more see [ID:nL5E7K91Q9] and [ID:nL5E7K91CF].
“The market has been euro-focused today because of all the
negative headlines and we have been bearish on the euro since
June,” said Tom Fitzpatrick, chief technical strategist at
CitiFX in New York.
“I wouldn’t be surprised if the euro hits $1.35 over the
next week or two and $1.30 by the end of the year. It would be
a struggle to get back above $1.40.”
The euro was also hurt by rumors Greece could default this
weekend, a speculation that was quashed by Greek finance
minister on Friday. See [ID:nL5E7K92JI].
News in Europe (Chicago Options: ^REURTRUSD – news) overshadowed U.S. President Barack Obama’s
proposed $447 billion jobs package on Thursday night, although
there was a brief trading flurry early in the Asian session
following his speech.
Some investors though were skeptical that Obama’s package
on jobs, made up largely of tax cuts for workers and
businesses, can sail smoothly through a divided Congress
[ID:nN1E78800M].
The euro fell as low as $1.36268 on electronic trading
platform EBS , its lowest level since Feb. 22, and was
last down 1.5 percent for the day at $1.36820.
The euro zone’s common currency was on pace for its largest
weekly loss since early January.
REDUCING EURO HOLDINGS
One of the euro’s early supporters among fund managers have
started to scale back their holdings of the currency such as
Palo Alto, California-based Merk Investments, with more than
$850 million in assets.
Merk said it sold over $90 million worth of euros late on
Thursday to reallocate to the Australian dollar. The firm
though remained positive on the euro in the long term and
believed that euro zone concerns should primarily be played out
in the pricing of the bond market nit the currency.
Against the yen, the euro fell to a low of 105.300 yen, the
lowest since at least mid 2004, the earliest EBS data available
at Reuters, before recovering to 105.419 yen, down 2 percent on
EBS .
On Reuters data, the euro dropped to 105.27 yen, the lowest
since July 2001.
Against the Swiss franc, the euro was down 0.7 percent at
1.20702 francs on EBS, still above the 1.20 floor
set by the Swiss National Bank this week.
“This is all coming at exactly the wrong time,” said Win (Taiwan OTC: 3105.TWO – news)
Thin, senior currency strategist at Brown Brothers Harriman.
“If we break $1.3659 — that’s a big retracement level of the
move this year — then you’re looking at $1.2867.”
The focus now shifts to a meeting of G7 finance ministers
in France on Friday though few are expecting any groundbreaking
agreement on steps to ease fiscal problems in the euro zone.
G7 officials are considering issuing a communique after
their talks, a G7 source said, and if they did it would talk
about the global economic slowdown, financial market turmoil
and the policy tools different countries could use, but it
would not make any reference to concerted intervention
[ID:nP6E7GQ01K].
The ICE dollar index rose to six-month highs of
77.276, helped largely by the euro’s fall. Against the yen, the
dollar edged up to a one-month high of 77.860 yen on
EBS but was down 0.1 percent at 77.415 yen.
(Additional reporting by Nick Olivari: Editing by Diane
Craft)
