Euro Touches 2-Year Low Before Finance Ministers Meet

The euro touched its lowest level in two years before regional finance ministers gather in Brussels today to discuss crisis-fighting measures adopted by heads of government at a summit last month.

Euro Touches 2-Year Low

The 17-nation currency weakened before European Central Bank President Mario Draghiaddresses the European parliament today. The yen advanced against all of its most-traded peers after Japan released trade data for May and as Asian stocks extended losses in global equity markets from last week, boosting demand for haven assets. Australia’s dollar fell for a second day after Chinese Premier Wen Jiabao said downward pressure on the economy is still “relatively large.”

“The risk around the finance ministers’ meeting is that we see more cracks appearing in European unity and perhaps a delay in implementation of the measures agreed on at the summit,” said Mike Jones, a Wellington-based currency strategist at Bank of New Zealand Ltd. “That’s taking some toll on the euro.”

The euro earlier slid to as low as $1.2251, the weakest since July 2010, before trading at $1.2294 as of 11:01 a.m. in Tokyo, little changed from the close on July 6. The shared currency lost 0.1 percent to 97.83 yen. The yen gained 0.1 percent to 79.56 per dollar. The so-called Aussie fetched $1.0210 from $1.0213.

The MSCI Asia Pacific Index (MXAP) of shares dropped 0.9 percent.

At a summit in June, euro-region leaders agreed to relax conditions on emergency loans for Spanish banks.

“We have to move quickly on banking supervision and we have to move quickly on the direct recapitalization of Spanish banks,” French Finance Minister Pierre Moscovici said yesterday.

Draghi Testimony

ECB President Draghi is scheduled to speak in the European parliament in Brussels today after policy makers cut the main refinancing rate to a record low 0.75 percent on July 5. Draghi said after last week’s decision the cut may have only a “muted” economic impact and growth in the euro area “continues to remain weak with heightened uncertainty.”

The euro has fallen 3.4 percent in the past three months, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen was the biggest gainer in the period, rising 6.6 percent.

Japan’s current-account surplus was 215.1 billion yen ($2.7 billion) in May, the Ministry of Finance said in Tokyo today. That compares with a median estimate for an excess of 493.1 billion yen in a Bloomberg News survey of economists.

Australia’s currency declined after the official Xinhua News Agency reported yesterday that Chinese Premier Wen said the government will intensify fine-tuning of policies in response to downside risks to growth. The comments came after the South Pacific nation’s biggest trading partner announced the second interest-rate cut in a month.

Consumer prices in China rose 2.2 percent in June from a year earlier, according to a report released today. That compares with the median forecast for a 2.3 percent inflation rate in a Bloomberg poll.

(Curtsey : Bloomberg)

Rupesh Yatesh Dalal
Head Research Department

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