The euro tumbled the most versus the US dollar in three months on concern that so-called peripheral European countries will struggle to repay their bondholders.
The US dollar gained against all of its 16 most-traded counterparts this week as risk-averse investors sought it as a refuge. The euro trimmed its five-day loss on Friday on speculation the EU will bail out Ireland, while the G20 leaders agreed to develop early-warning indicators to head off global economic turmoil. US consumer prices rose 0.3 percent last month, a report next week may show.
“The focus is all on the periphery,” said Aroop Chatterjee, a currency strategist at Barclays PLC in New York. “The issues of the eurozone have come back on the front burner. There was very little conviction in euro buying to begin with, and now there’s less of a reason.”
The 16-nation currency dropped 2.4 percent to US$1.3691, the biggest weekly loss since Aug. 13. It more than erased a 0.6 percent advance it made the previous week.
The yen rose 0.9 percent to ¥113.02 per euro, from ¥114.03 on Nov. 5. The Japanese currency declined for a second week against the US dollar, falling 1.5 percent to ¥82.53 and touching a one-month low of ¥82.80 on Wednesday.
The euro weakened as the extra yield investors demand to hold 10-year Irish and Portuguese government bonds instead of benchmark German bunds widened to records and data showed Europe’s biggest economies are slowing.
The euro lost 0.4 percent in the past week in a measure of 10 developed-nation counterparts, Bloomberg Correlation-Weighted Currency Indexes show.
The yuan gained 0.3 percent for the week to 6.6383 per US dollar. The People’s Bank of China set the currency’s reference rate for trading at 6.6239 on Friday, the strongest since a peg ended in July 2005.
Sterling was little changed at £0.8476 per euro on Friday, after gaining for the previous six days. The pound rose 0.1 percent to US$1.6133.
ASIAN CURRENCIES
Asian currencies fell this week, led by South Korea’s won and the Philippine peso, on speculation policy makers around the region will impose controls to temper the effect of surging inflows on their currencies.
G20 officials repeated after meetings in Seoul that they will refrain from “competitive devaluations” of their currencies, the same comments that were made last month. South Korea is considering raising taxes or introducing bank levies as possible options to control capital inflows, Shin Hyun-song, presidential adviser for international economy, said at a press conference on Friday.
The won declined 1.8 percent this week to 1,127.84 per US dollar in Seoul, according to data compiled by Bloomberg. The Indian rupee slid 1.2 percent to 44.73, the peso dropped 2.4 percent to 43.73, and Malaysia’s ringgit fell 1 percent to 3.1170.
The New Taiwan dollar snapped a three-day advance on Friday and finished the week lower after suspected central bank intervention to check appreciation that could hurt exports.
The central bank bought the US dollar, according to two traders who declined to be identified. International funds bought US$235.3 million more local stocks than they bought this week, pushing this year’s net purchase to US$7.2 billion.
“The trend is for the Taiwan dollar to rise toward [the] year-end,” said Henry Lin, a Taipei-based foreign-exchange trader at Shin Kong Commercial Bank (新光銀行). “Intervention will continue, but it won’t stop the inflows of hot money.”
The NT dollar dropped 0.7 percent this week to NT$30.762 versus the greenback as of its 4pm close on Friday, according to Taipei Forex Inc. The currency earlier reached NT$30.015 on Friday, the highest level since March 2008. It weakened 0.8 percent from Thursday.
The currency has pared gains on speculation policymakers intervened in the final minutes of trading for more than six months, according to traders who declined to be identified because the central bank doesn’t usually publicly disclose details of market actions.
Appreciation in the exchange rate tends to push up the cost of exports overseas.
Elsewhere, Indonesia’s rupiah fell 0.3 percent during the week to 8,926 per dollar and China’s yuan gained 0.17 percent to 6.6370. The Thai baht dropped 0.5 percent to 29.83 and Singapore’s dollar declined 0.8 percent to S$1.2977.
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