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.
The rand plunged 4.5 percent this week to 7.0206 per US dollar, the biggest drop since October 2009.
ASIAN CURRENCIES
The European debt crisis also resulted in a weekly loss for Asian currencies, led by South Korea’s won and India’s rupee, as concern Europe’s debt crisis will worsen bolstered demand for US dollars.
The won dropped to a three-week low after Bank of Korea unexpectedly left interest rates unchanged on Friday. The yuan had its sharpest weekly decline in two months as China raised lenders’ reserve-requirement ratios for the fifth time this year and government data showed industrial output moderated last month.
“This week there was a commodity selloff and concern on Greece’s debt crisis,” said Joanna Tan, a Singapore-based regional economist at Forecast Singapore Pte. “The underlying sentiment in Asian currencies is caution with Europe’s problems still ongoing and worries about commodities.”
The New Taiwan dollar on Friday closed at NT$28.788 against the greenback, less than 0.05 percent away from its levels the previous week, according to Taipei Forex Inc. It touched NT$28.476 on Wednesday, the strongest level since October 1997.
The NT dollar erased a weekly gain in the final minutes of trading on Friday on suspected intervention by the central bank, according to two traders who refused to be identified, as the authority doesn’t disclose such details. The NT dollar was 0.4 percent stronger three minutes before the end of the trading session that day.
The won declined 0.3 percent for the week to 1,086.80 per US dollar as of the 3pm close in Seoul, according to data compiled by Bloomberg. The rupee fell 0.2 percent to 44.865, Singapore’s dollar dropped 0.3 percent to S$1.2391 and the yuan retreated 0.06 percent to 6.4977.
The Bank of Korea kept its seven-day repurchase rate at 3 percent, a move predicted by two of 14 economists surveyed by Bloomberg. Twelve forecast a quarter of a percentage point rise to curb inflation. Bank Indonesia kept its benchmark rate at 6.75 percent yesterday, a decision predicted by all 10 economists in a Bloomberg survey.
“Expectations for a rate increase had been limiting declines in the won this week,” said Yun Se-min, a currency dealer at Busan Bank in Seoul. The currency closed 0.2 percent weaker today after earlier dropping as much as 0.7 percent.
Thailand’s baht rose 0.1 percent this week and 0.4 percent today. The currency rebounded from its biggest one-day decline in four months yesterday after Fitch Ratings raised the outlook on Thailand’s local-currency credit rating to stable from negative, citing an earlier-than-expected stabilization of the nation’s finances.
Elsewhere, the Philippine peso declined 0.1 percent this week to 43.14 per dollar. Malaysia’s ringgit was little changed at 3.0013. Indonesia’s rupiah gained 0.4 percent to 8,543, while Vietnam’s dong was little changed at 20,570.
Additional reporting by staff writer
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