March 23, 2010Euro Declines as France, Germany Agree IMF to Handle Greece Aid
The euro fell versus most major counterparts after an official said French and German leaders agreed to let the International Monetary Fund handle a Greece bailout, damping demand for the common currency.
Switzerland’s currency rose against the euro for the eighth straight day, the longest run in 17 months, on bets the Swiss central bank will allow the currency to gain as the economy improves. The pound slid after U.K. inflation slowed last month by more than forecast, buoying the case for the Bank of England to keep rates at a record low to safeguard the recovery.
“Calling the IMF doesn’t really solve the issue,” said Sebastien Galy, a currency strategist at BNP Paribas SA in New York, who predicts the euro will fall to $1.20. “It’s a transfer of debt from one part of the system to another part of the system. It’s possible short positions will be squeezed, but the euro will still head lower.”
The euro depreciated 0.4 percent to $1.3499 at 1:57 p.m. in New York, from $1.3558 yesterday, when it touched $1.3464, the lowest level since March 2. The euro slipped 0.2 percent to 122 yen, from 122.21. The dollar advanced 0.2 percent to 90.35 yen, from 90.14 yen.
The euro weakened versus 14 of its 16 major counterparts after a German Finance Ministry official told reporters in Berlin today, on condition of anonymity, that Germany and France agreed to back IMF aid to Greece.
Earlier, German Chancellor Angela Merkel’s Christian Democratic Union party said it expects her to “resist calls to agree” to aid at this week’s European Union summit, CDU parliamentary group finance spokesman Michael Meister said in a phone interview. That increased chances that Greece will leave the March 25-26 meeting in Brussels empty-handed.
‘No Concessionary Element’
European Central Bank President Jean-Claude Trichet spoke out yesterday against offering the low-interest loans for which the Greek government has pressed. He told lawmakers in Brussels there should be no “subsidy element, no concessionary element” in a potential loan to Greece.
Luxembourg’s Jean-Claude Juncker, who heads the group of finance ministers in the euro region, said the EU won’t “abandon” Greece.
“The continued uncertainty about the resolution is triggering a medium-term asset allocation shift away from euros,” said Jens Nordvig, a managing director of currency research in New York at Nomura International Plc, who forecasts the euro will trade as low as $1.25 by year-end. “It’s the longer-term players that are changing how they invest in the euro zone.”
‘Cautious’ About Euro
The euro may fall toward $1.20 for the first time since March 2006, according to BlueGold Capital Management LLP, as the Greek crisis forges a split in monetary policy between the ECB and the Federal Reserve.
“This policy divergence is one of the central pillars of my view going forward,” said Stephen Jen, managing director of hedge-fund manager BlueGold in London and a former chief currency strategist at Morgan Stanley. “It is one more reason for investors to be cautious about the euro.”
The Fed will raise its benchmark rate to 0.5 percent by the third quarter, according to the weighted average of economists in a Bloomberg survey. The ECB will raise its target rate to 1.25 percent in the fourth quarter, according to a separate survey of economists.
Swiss Franc
The franc climbed against the euro, strengthening past 1.43 for the first time, even after Swiss National Bank President Philipp Hildebrand reiterated today policy makers are ready to act “decisively” to counter any “excessive” gains in the currency. The franc touched 1.4262 per euro, a record, before trading at 1.4268.
UBS AG, the world’s second-biggest currency trader, lowered its forecast for the euro against the franc yesterday, estimating that the common European currency will buy 1.42 francs in one month and 1.40 francs in three months.
“The justification for large-scale interventions is fading fast with deflation disappearing and economic indicators strong,” analysts including Mansoor Mohi-uddin in Singapore wrote in a report. Central banks intervene by purchasing or selling currencies to influence exchange rates.
The pound slid as a report from the Office for National Statistics showed U.K. consumer prices increased 3 percent from a year earlier, after rising 3.5 percent in January. The median forecast in a Bloomberg survey was 3.1 percent.
Sterling declined 0.5 percent to $1.5032, and weakened 0.1 percent to 89.84 pence per euro.
Brazil’s real was the top performer among major currencies on the prospect for higher economic growth and iron-ore prices.
Economists forecast the nation’s gross domestic product will expand 5.5 percent this year, according to a central bank survey taken March 19 and published yesterday, more than the average estimate of 5.45 percent a week earlier. Vale SA adopted a different iron-ore pricing system and more than doubled rates on some types of ore, Valor Economico reported today, citing a note the company sent to clients.
The real appreciated 0.4 percent to 1.7825 per U.S. dollar, from 1.7897 yesterday.
The euro fell versus most major counterparts after an official said French and German leaders agreed to let the International Monetary Fund handle a Greece bailout, damping demand for the common currency.
Switzerland’s currency rose against the euro for the eighth straight day, the longest run in 17 months, on bets the Swiss central bank will allow the currency to gain as the economy improves. The pound slid after U.K. inflation slowed last month by more than forecast, buoying the case for the Bank of England to keep rates at a record low to safeguard the recovery.
“Calling the IMF doesn’t really solve the issue,” said Sebastien Galy, a currency strategist at BNP Paribas SA in New York, who predicts the euro will fall to $1.20. “It’s a transfer of debt from one part of the system to another part of the system. It’s possible short positions will be squeezed, but the euro will still head lower.”
The euro depreciated 0.4 percent to $1.3499 at 1:57 p.m. in New York, from $1.3558 yesterday, when it touched $1.3464, the lowest level since March 2. The euro slipped 0.2 percent to 122 yen, from 122.21. The dollar advanced 0.2 percent to 90.35 yen, from 90.14 yen.
The euro weakened versus 14 of its 16 major counterparts after a German Finance Ministry official told reporters in Berlin today, on condition of anonymity, that Germany and France agreed to back IMF aid to Greece.
Earlier, German Chancellor Angela Merkel’s Christian Democratic Union party said it expects her to “resist calls to agree” to aid at this week’s European Union summit, CDU parliamentary group finance spokesman Michael Meister said in a phone interview. That increased chances that Greece will leave the March 25-26 meeting in Brussels empty-handed.
‘No Concessionary Element’
European Central Bank President Jean-Claude Trichet spoke out yesterday against offering the low-interest loans for which the Greek government has pressed. He told lawmakers in Brussels there should be no “subsidy element, no concessionary element” in a potential loan to Greece.
Luxembourg’s Jean-Claude Juncker, who heads the group of finance ministers in the euro region, said the EU won’t “abandon” Greece.
“The continued uncertainty about the resolution is triggering a medium-term asset allocation shift away from euros,” said Jens Nordvig, a managing director of currency research in New York at Nomura International Plc, who forecasts the euro will trade as low as $1.25 by year-end. “It’s the longer-term players that are changing how they invest in the euro zone.”
‘Cautious’ About Euro
The euro may fall toward $1.20 for the first time since March 2006, according to BlueGold Capital Management LLP, as the Greek crisis forges a split in monetary policy between the ECB and the Federal Reserve.
“This policy divergence is one of the central pillars of my view going forward,” said Stephen Jen, managing director of hedge-fund manager BlueGold in London and a former chief currency strategist at Morgan Stanley. “It is one more reason for investors to be cautious about the euro.”
The Fed will raise its benchmark rate to 0.5 percent by the third quarter, according to the weighted average of economists in a Bloomberg survey. The ECB will raise its target rate to 1.25 percent in the fourth quarter, according to a separate survey of economists.
Swiss Franc
The franc climbed against the euro, strengthening past 1.43 for the first time, even after Swiss National Bank President Philipp Hildebrand reiterated today policy makers are ready to act “decisively” to counter any “excessive” gains in the currency. The franc touched 1.4262 per euro, a record, before trading at 1.4268.
UBS AG, the world’s second-biggest currency trader, lowered its forecast for the euro against the franc yesterday, estimating that the common European currency will buy 1.42 francs in one month and 1.40 francs in three months.
“The justification for large-scale interventions is fading fast with deflation disappearing and economic indicators strong,” analysts including Mansoor Mohi-uddin in Singapore wrote in a report. Central banks intervene by purchasing or selling currencies to influence exchange rates.
The pound slid as a report from the Office for National Statistics showed U.K. consumer prices increased 3 percent from a year earlier, after rising 3.5 percent in January. The median forecast in a Bloomberg survey was 3.1 percent.
Sterling declined 0.5 percent to $1.5032, and weakened 0.1 percent to 89.84 pence per euro.
Brazil’s real was the top performer among major currencies on the prospect for higher economic growth and iron-ore prices.
Economists forecast the nation’s gross domestic product will expand 5.5 percent this year, according to a central bank survey taken March 19 and published yesterday, more than the average estimate of 5.45 percent a week earlier. Vale SA adopted a different iron-ore pricing system and more than doubled rates on some types of ore, Valor Economico reported today, citing a note the company sent to clients.
The real appreciated 0.4 percent to 1.7825 per U.S. dollar, from 1.7897 yesterday.
AP
