The euro fell against all but two of its 16 most-traded counterparts, reaching a six-week low against the US dollar, on concern Greece may have to restructure its debt and the nation’s problems may spread in the region.
The 17-nation currency weakened before European finance ministers meet next week to discuss further support for Greece as the nation’s cost of borrowing hovers at almost record levels. The US dollar gained versus most peers this week as stocks and commodities fluctuated. South Africa’s rand was the worst performer among major currencies, dropping the most in 18 months against the greenback as unemployment jumped.
“The overall prevailing theme is the European debt market mood and the euro has been caught up in that this week,” said Nick Bennenbroek, head of currency strategy at Wells Fargo & Co in New York. “There’s been a role reversal in the context of recent events; the short-term inclination of the markets, instead of being to sell the dollar, is to sell the euro.”
The euro dropped 1.4 percent to US$1.4118, from US$1.4316 on Friday last week, in its second weekly loss versus the greenback. It touched US$1.4067 yesterday, the lowest level since April 1. The shared currency fell 1.2 percent to ￥114.06 and touched ￥113.52, the strongest level since March 18, when G7 central banks sold yen in the currency markets to stem its surge after an earthquake and tsunami.
The US dollar rose 0.2 percent this week to ￥80.79, from ￥80.63.
The yen touched the strongest level in two months versus the euro on Friday, as Japanese Minister of State for Economic and Fiscal Policy Kaoru Yosano said its strength resulted from a weaker dollar, not independent gains.
The currency also strengthened amid speculation Tokyo Electric Power Co is repatriating overseas funds to pay for damages and compensation in the wake of the nuclear power-plant disaster after the quake and tsunami March 11.
Futures traders lowered their bets the euro will gain against the US dollar after raising them a week earlier to an almost four-year high.
The euro slid on Friday as Die Welt reported that Germany backed a “voluntary restructuring” of Greek debt. The German newspaper didn’t say where it got the information.
The German government has “no knowledge” of any plan for a Greek restructuring, spokesman Christoph Steegmans said in an interview. It is waiting for the conclusions of a European and IMF mission to Greece before making any decision on further steps.
Greece’s debt, already the biggest in the euro’s history at 143 percent of GDP last year, will jump to almost 158 percent this year and 166 percent next year, the European Commission said on Friday in Brussels. Greek two-year note yields rose to a record 26.77 percent on Thursday, compared with 1.79 percent on German two-year securities.
The rand tumbled against the US dollar on Friday, as data showed the jobless rate in Africa’s biggest economy increased to 25 percent in the first quarter. The South African Reserve Bank left interest rates unchanged this week at 5.5 percent to help spur economic recovery even as a report next week is forecast to show inflation at 4.4 percent last month.
“They’re not going to be able to hike because they’re under pressure to maintain stimulus due to the labor sector,” said Win Thin, global head of emerging market strategy at Brown Brothers Harriman & Co in New York.