Tue, Feb 12, 2013 - Page 6 News List

Euro touches two-week low on slowdown signs

YEN PARES GAINS:The 17 eurozone finance chiefs met yesterday to win back crisis-management momentum and review progress on the key measures agreed last year

Bloomberg and Reuters, LONDON

The euro touched a two-week low against the US dollar on signs the region’s economy is slowing amid political uncertainty in Italy and Spain.

The 17-nation currency held a three-day loss versus the yen before data forecast to show industrial production in France fell and with finance chiefs from the bloc set to meet in Brussels to discuss aid to Cyprus and Greece.

“There’s negative momentum behind the euro at the moment,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp. “You have more European risks apparent than a month ago.”

The euro yesterday touched US$1.3325, the lowest since Jan. 24, before trading at US$1.3384 at 6:10am in London, 0.2 percent above the close at the end of last week in New York. The euro was little changed at ¥123.92, after losing 2.6 percent in the past three sessions.

French industrial production slid 0.1 percent in December amid a slump in economic growth and mounting unemployment, the government’s statistics showed yesterday. The decline in the final month of the year came after a 0.5 percent increase in industrial production in November. On a year-on-year basis, the measure fell 2.1 percent.

European finance chiefs will seek to win back crisis-management momentum after markets signaled last week that the three-year crisis is far from over. Ministers from the eurozone met in Brussels yesterday.

However, analysts were not expecting much new from a eurozone finance ministers meeting, though markets will be on watch for any discussion on the strength of the euro ahead of the G20 meeting at the end of the week.

Since hitting a 15-month high of US$1.3711 on Feb. 1, sentiment toward the euro has shifted after European Central Bank (ECB) President Mario Draghi suggested any further strength could result in an interest rate cut. Nervousness over political developments in Spain and Italy has also unsettled the currency.

Spanish Prime Minister Mariano Rajoy has faced calls to resign after newspaper reports alleged he accepted illegal cash payments. Opinion polls have shown former Italy prime minister Silvio Berlusconi, who was convicted of tax fraud last October, closing the gap on frontrunner Pier Luigi Bersani ahead of elections on Feb. 24 and 25.

“The euro has stabilized at lower levels following last week’s verbal intervention from ECB President Draghi, which was a subtle attempt to dampen the pace of euro appreciation in the near term,” Bank of Tokyo-Mitsubishi UFJ currency analyst Lee Hardman said.

An EU official said yesterday’s meeting would review the situation, but no accord is expected until a new Cypriot government is formed in March.

Eurozone ministers will likely also review progress on the key measures agreed last year — a single regulator for the banks and the working of the European Stability Mechanism, the bloc’s defense backstop.

Officials say ministers were also to honor respected former eurogroup president Jean-Claude Juncker of Luxembourg, who served for eight years, stepping down last month after overseeing a difficult overhaul of the euro’s shaky foundations.

The 17 eurozone finance ministers are scheduled to be joined by their 10 non-eurozone colleagues for the meeting today.

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