The euro fell to its lowest level since the collapse of Lehman Brothers Holdings Inc on concern that the 16-nation currency may be headed for disintegration.
The shared currency fell for a fourth week versus the US dollar and a third week versus the yen, the longest losing streaks since February, as German Chancellor Angela Merkel said that Europe is in a “very, very serious situation” despite a rescue package for the region’s most indebted nations. European Central Bank (ECB) Governing Council member Axel Weber speaks on financial-market regulation next week in Berlin.
“We went through a massive liquidation trade in Europe and risk-taking positions were wiped out across the board,” said Sebastien Galy, a currency strategist at BN Paribas SA in New York. “The markets are trying to figure out what the consequences are for growth. There are massive uncertainties and that will keep the downward pressure on the euro.”
The euro fell 3.1 percent to US$1.2358 this week, from US$1.2755 on May 7. It traded as low as US$1.2354 on Friday, the weakest since October 2008. The common currency dropped 2.1 percent to ¥114.38, from ¥116.81 last week. The US dollar traded at ¥92.47 after gaining 1 percent last week, the first weekly gain since the five days ended April 23.
European policymakers last week unveiled a loan package worth almost US$1 trillion and a program of bond purchases in an effort to contain a sovereign-debt crisis that has threatened to shatter confidence in the euro. ECB President Jean-Claude Trichet said the move wasn’t supported by all 22 of the bank’s Governing Council members.
The ECB said it would intervene in government and private bond markets “to ensure depth and liquidity in those market segments which are dysfunctional,” and central banks in Germany, Italy and France began buying government bonds on Friday. The ECB restarted a dollar-swap line with the Federal Reserve.
The German chancellor’s comments followed a report from El Pais that French President Nicolas Sarkozy threatened to pull out of the euro unless Merkel agreed to back the EU’s bailout plan at a meeting last weekend in Brussels, citing comments Spain’s Prime Minister Jose Luis Rodriguez Zapatero made at a meeting of socialist politicians. The Madrid-based newspaper didn’t say how it obtained the information. Aides to Sarkozy, Merkel and Zapatero all denied the report.
“The euro is doomed,” said Andrew Wilkinson, senior market analyst at Interactive Brokers Group LLC in Greenwich, Connecticut. “It’s like a clown without its makeup. The strains among the partners are becoming clear and it’s becoming harder to see global growth not being threatened by this.”
The euro has lost 9 percent this year, according to Bloomberg Correlation-Weighted Indices. The US dollar has gained 7.2 percent and the yen has advanced 7.9 percent.
The pound slid 1.8 percent to US$1.4536, its third weekly decline versus the US dollar, amid speculation that the UK’s governing coalition may collapse by year-end.
Asian currencies appreciated this week, led by Malaysia’s ringgit and South Korea’s won, on signs the region’s economic growth is gathering pace, bolstering demand for emerging-market assets.
The ringgit strengthened 2.4 percent this week to 3.1955 per dollar in Kuala Lumpur, the biggest five-day gain since October last year, according to data compiled by Bloomberg. South Korea’s won rose 2.2 percent to 1,130.93, and the Philippine peso climbed 1.7 percent to 44.76.
Yuan forwards appreciated 0.6 percent this week, the biggest five-day gain since December, on speculation the second US-China Strategic and Economic Dialogue in Beijing on May 24-25 will foster currency appreciation.
The New Taiwan dollar declined on Friday, erasing earlier gains, on speculation policy makers intervened to curb currency appreciation and support exports.
The NT dollar edged down 0.2 percent to NT$31.848 against its US counterpart as of the 4pm close on Friday, according to Taipei Forex Inc. It ended last week at NT$31.850.
The NT dollar has appreciated 0.4 percent this year as overseas investors bought US$2.2 billion more Taiwan equities than they sold.
Elsewhere, Thailand’s baht traded at 32.38 versus the US currency, compared with 32.35 on May 7. Indonesia’s rupiah climbed 1.3 percent to 9,105 and India’s rupee appreciated 0.6 percent to 45.23.
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