MNeagle
4th May 2010, 12:33 PM
May 4 (Bloomberg) -- The euro traded below $1.30 for the first time since April 2009 on concern a 110 billion-euro ($143 billion) rescue package for Greece will fail to contain the region’s debt crisis.
The 16-nation currency fell the most in a week against the yen as bond yields from Spain to Portugal to Ireland rose on concern the crisis that began in Greece is spreading. Spanish Prime Minister Jose Luis Rodriguez Zapatero told reporters in Brussels today that rumors of a bailout for his country are “complete madness.â€
“The issues in Greece have highlighted the weakness in the euro framework and that’s weighing on the euro,†said Camilla Sutton, a Bank of Nova Scotia currency strategist in Toronto. “There is still no plan in place for weaker member states and there’s no mechanism to help them.â€
The euro fell 1.5 percent to $1.3003 at 3:01 p.m. in New York and touched $1.2994, the least since April 28, 2009. It declined as much as 1.7 percent against the yen to 122.67, the biggest move since April 27. The pound rose to 85.7 pence per euro, the first time it has strengthened past 86 pence since Aug. 20.
Japan’s currency appreciated against most of its major counterparts as stocks and oil fell, damping demand for assets linked to growth. Crude oil for June delivery fell as much as 4.1 percent to $82.65 a barrel on the New York Mercantile Exchange. The Stoxx Europe 600 Index slipped 2.9 percent to 252.96.
The euro declined against 8 of the 16 most-traded currencies tracked by Bloomberg as investors sought more evidence that the rescue package approved over the weekend will resolve Greece’s debt crisis.
‘Plagued Efforts’
Citigroup Inc. said it had to end a “cautiously optimistic†bet placed yesterday that the euro would swing between $1.31 and $1.37 for three weeks, the New York investment bank said in an e-mail to clients.
“What has always plagued efforts to resolve the crisis is that the depth of commitment has never been enough to convince investors that neither Greece nor any other euro zone country will default or drop out of the euro,†wrote Steven Englander, head of Group of 10 currency strategy at Citigroup in New York.
Two-year Greek yields rose as much as 400 basis points, or 4 percentage points, to 14.27 percent today, erasing yesterday’s decline. The cost to protect against losses on Greek debt surged 85 basis points to 731, CMA DataVision prices show, implying almost a 45 percent chance of default in the next five years.
European Yields Rise
Greek 10-year yields rose 72 basis points to 9.20 percent. The rate on similar-maturity debt in Spain climbed 9 basis points to 4.11 percent, Portuguese yields advanced 32 basis points to 5.42 percent and the rate on Irish notes increased 16 basis points to 5.26 percent.
The European Union’s three-year financial lifeline requires Greece to reduce its budget deficit below the currency area’s limit of 3 percent of gross domestic product by the end of 2014, a year later than originally planned.
Greek government workers today shut down schools and hospitals and disrupted flights as demonstrators occupied the Acropolis in an escalation of protests against the 30 billion euros ($40 billion) of additional wage cuts and tax increases unveiled by Prime Minister George Papandreou. A general strike, the third this year, is planned for tomorrow, with private- sector workers due to participate.
‘Shot to Pieces’
The 16-nation euro has lost 6.7 percent of its value this year amid concern Greece’s fiscal woes will push up borrowing costs for other nations, Bloomberg Correlation-Weighted Currency Indexes show.
The euro also fell after the European Central Bank yesterday diluted lending rules for the second time in a month to guarantee that Greek debt will still be accepted as collateral for loans.
“The ECB’s credibility has been shot to pieces, and we’ve yet to see the political fallout from the Greek bailout,†said Steven Barrow, head of G-10 currency research at Standard Bank Plc in London. “The only restriction on the euro’s downside is that the market is already so short the currency.†A short is a bet the price of an asset will decline.
Pound Declines
The pound fell for a third day against the dollar, the longest run of declines in more than five weeks, on speculation this week’s election will leave the nation with a government too weak to rein in its record budget deficit.
The U.K. currency fell as much as 1 percent to $1.5091, the lowest since March 31, and declined 0.6 percent to 143.26 yen.
Australia’s dollar slipped 1.8 percent to 90.91 U.S. cents after the central bank signaled today’s interest-rate increase, the sixth in seven meetings, may be the last for some time.
Australia’s benchmark interest rate of 4.5 percent is 440 basis points higher than Japan’s and at least 425 more than the U.S.’s, making the nation’s assets more attractive to investors seeking higher returns.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a05e95pNEclM&pos=1
The 16-nation currency fell the most in a week against the yen as bond yields from Spain to Portugal to Ireland rose on concern the crisis that began in Greece is spreading. Spanish Prime Minister Jose Luis Rodriguez Zapatero told reporters in Brussels today that rumors of a bailout for his country are “complete madness.â€
“The issues in Greece have highlighted the weakness in the euro framework and that’s weighing on the euro,†said Camilla Sutton, a Bank of Nova Scotia currency strategist in Toronto. “There is still no plan in place for weaker member states and there’s no mechanism to help them.â€
The euro fell 1.5 percent to $1.3003 at 3:01 p.m. in New York and touched $1.2994, the least since April 28, 2009. It declined as much as 1.7 percent against the yen to 122.67, the biggest move since April 27. The pound rose to 85.7 pence per euro, the first time it has strengthened past 86 pence since Aug. 20.
Japan’s currency appreciated against most of its major counterparts as stocks and oil fell, damping demand for assets linked to growth. Crude oil for June delivery fell as much as 4.1 percent to $82.65 a barrel on the New York Mercantile Exchange. The Stoxx Europe 600 Index slipped 2.9 percent to 252.96.
The euro declined against 8 of the 16 most-traded currencies tracked by Bloomberg as investors sought more evidence that the rescue package approved over the weekend will resolve Greece’s debt crisis.
‘Plagued Efforts’
Citigroup Inc. said it had to end a “cautiously optimistic†bet placed yesterday that the euro would swing between $1.31 and $1.37 for three weeks, the New York investment bank said in an e-mail to clients.
“What has always plagued efforts to resolve the crisis is that the depth of commitment has never been enough to convince investors that neither Greece nor any other euro zone country will default or drop out of the euro,†wrote Steven Englander, head of Group of 10 currency strategy at Citigroup in New York.
Two-year Greek yields rose as much as 400 basis points, or 4 percentage points, to 14.27 percent today, erasing yesterday’s decline. The cost to protect against losses on Greek debt surged 85 basis points to 731, CMA DataVision prices show, implying almost a 45 percent chance of default in the next five years.
European Yields Rise
Greek 10-year yields rose 72 basis points to 9.20 percent. The rate on similar-maturity debt in Spain climbed 9 basis points to 4.11 percent, Portuguese yields advanced 32 basis points to 5.42 percent and the rate on Irish notes increased 16 basis points to 5.26 percent.
The European Union’s three-year financial lifeline requires Greece to reduce its budget deficit below the currency area’s limit of 3 percent of gross domestic product by the end of 2014, a year later than originally planned.
Greek government workers today shut down schools and hospitals and disrupted flights as demonstrators occupied the Acropolis in an escalation of protests against the 30 billion euros ($40 billion) of additional wage cuts and tax increases unveiled by Prime Minister George Papandreou. A general strike, the third this year, is planned for tomorrow, with private- sector workers due to participate.
‘Shot to Pieces’
The 16-nation euro has lost 6.7 percent of its value this year amid concern Greece’s fiscal woes will push up borrowing costs for other nations, Bloomberg Correlation-Weighted Currency Indexes show.
The euro also fell after the European Central Bank yesterday diluted lending rules for the second time in a month to guarantee that Greek debt will still be accepted as collateral for loans.
“The ECB’s credibility has been shot to pieces, and we’ve yet to see the political fallout from the Greek bailout,†said Steven Barrow, head of G-10 currency research at Standard Bank Plc in London. “The only restriction on the euro’s downside is that the market is already so short the currency.†A short is a bet the price of an asset will decline.
Pound Declines
The pound fell for a third day against the dollar, the longest run of declines in more than five weeks, on speculation this week’s election will leave the nation with a government too weak to rein in its record budget deficit.
The U.K. currency fell as much as 1 percent to $1.5091, the lowest since March 31, and declined 0.6 percent to 143.26 yen.
Australia’s dollar slipped 1.8 percent to 90.91 U.S. cents after the central bank signaled today’s interest-rate increase, the sixth in seven meetings, may be the last for some time.
Australia’s benchmark interest rate of 4.5 percent is 440 basis points higher than Japan’s and at least 425 more than the U.S.’s, making the nation’s assets more attractive to investors seeking higher returns.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a05e95pNEclM&pos=1