The euro held near its lowest level against the dollar since April 2006 even as European finance ministers sought to assuage concern that spending cuts to combat the region’s debt crisis will derail growth.
The single currency weakened the most against the South Korean won and the South African rand before a German report forecast to show deteriorating confidence among analysts and investors in Europe’s largest economy. Australia’s dollar held near a three-month low after central bank minutes of its May 4 meeting damped expectations for continued interest-rate increases as policy makers warned about effects from Europe’s fiscal crisis.
“Sentiment towards the euro remains very weak for good reasons,” said Paul Robson, a senior foreign-exchange strategist at Royal Bank of Scotland Group Plc in London. “That’s going to send it below $1.20 in the month ahead.”
The euro was little changed at $1.2404 as of 8:27 a.m. in London, from $1.2395 in New York yesterday, when it fell as much as 1 percent to $1.2235, the lowest since April 18, 2006. It climbed to 115.19 yen from 114.77 yen yesterday, when it reached the least since May 6. The dollar climbed to 92.87 yen from 92.59.
Australia’s currency was little changed at 87.77 U.S. cents after touching 86.86 cents yesterday, the least since Feb. 9. The euro dropped 0.6 percent to 1,421.197 won and the same percentage to 9.3102 rand.
Spending Cuts
Euro area policy makers last week unveiled an unprecedented loan package worth nearly $1 trillion and a program of bond purchases to forestall defaults by countries including Greece, Spain and Portugal.
Spain unveiled on May 14 the biggest cuts in at least 30 years and Portugal followed a day later, pledging to slash wages and raise taxes. Italian officials said May 16 it may make an extraordinary reduction in spending and France is slated to submit spending plans this week.
Only high-deficit countries including Spain and Portugal will be ordered to make additional deficit cuts, while budget policies will remain untouched in better-off nations such as Germany and Finland, European finance ministers said after a meeting in Brussels.
“Not everyone will accelerate consolidation in a very uniform way,” European Union Economic and Monetary Affairs Commissioner Olli Rehn told reporters early today in Brussels. “That would lead to a very restrictive fiscal stance for the euro area as a whole, which would risk depressing economic growth.”
Relative Strength Index
The euro dropped 8.8 percent this year against its developed world counterparts, according to Bloomberg Correlation Weighted Indexes. The common currency rebounded from a four-year low yesterday after the European Central Bank explained how it would absorb excess liquidity from bond purchases.
The euro’s 14-day relative-strength index, a measure of how rapidly prices rise or fall, was at 24.01 today. Readings below 30 are a signal that an asset’s value has dropped too fast and is poised to rebound.
The euro also came under pressure after the U.S. Senate voted for a measure that would require the Treasury Department to certify that International Monetary Fund loans to highly indebted countries get repaid. The IMF is taking part in the euro-zone bailout.
The Australian dollar was near its three-month low on speculation the Reserve Bank of Australia will slow down the pace of interest rate increases as Europe’s debt crisis threatens to stall the global economic recovery.
‘Signaling Slowdown’
“Increases in interest rates to date had been timely” with signs that the moves were “beginning to affect behavior” of consumers and home buyers, RBA officials said in minutes released today in Sydney of their May 4 meeting.
“The RBA is signaling a slowdown in the pace of rate hikes ahead, giving way to the kiwi for which interest rate expectations are gradually rising,” said Akira Maekawa, a senior economist at online currency trader Global Futures & Forex Ltd. in Tokyo.
Losses in the euro may be tempered as European policy makers signaled they will provide enough funds for Greece to pay its debt as scheduled.
Greece will receive 14.5 billion euros ($17.9 billion) in the first installment of emergency European Union loans today, a Greek Finance Ministry official, who declined to be identified, said yesterday in Athens. In Brussels, EU spokesman Amadeu Altafaj confirmed the bloc will send the first loan tranche today.
The funds will arrive one day before 8.5 billion euros of bonds come due and will cover the country’s financing needs for May and June, the Greek official said.A troupe of little vagrants of the world
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