The euro fell, ending its longest weekly rally in nine months versus the dollar, on concern stress tests of EU banks failed to identify sources of weakness that would aggravate the region’s debt crisis.
The 16-nation currency depreciated against the majority of its most-actively traded counterparts, slumping the greatest amount versus growth-sensitive currencies such as the Australian and New Zealand dollars. Tests showing that only seven banks flunked the EU’s crisis scenario failed to ease concern lenders may lack sufficient capital, pushing the euro to reverse gains recorded earlier in the week.
“The euro’s definitely had its ups and downs,” said Vassili Serebriakov, a currency strategist at Wells Fargo & Co in New York. “Markets were questioning whether the stress tests were stressful enough, in other words, whether they were stringent enough.”
The euro fell 0.2 percent this week to US$1.2909 on Friday in New York, from US$1.2930 on July 16. The yen weakened 1 percent to ¥87.46 per US dollar from ¥86.57 last week. The euro slumped 3.1 percent to A$1.4414 versus Australia’s currency and 2.5 percent to NZ$1.775 against its New Zealand counterpart.
The euro gained on Friday as traders closed out bets that the currency would weaken further when equities rallied. The yen extended its decline versus the dollar as Japanese policymakers signaled for a third day that a stronger currency poses a danger to growth, spurring speculation they will take steps to counter that risk.
The pound advanced against the US dollar for the second straight week amid signs the UK economic recovery is taking hold, potentially reducing the need for the central bank to extend stimulus measures.
The pound gained 0.8 percent to US$1.5423 as of 4:27pm in London on Friday, from US$1.5301 on July 16. It appreciated 1.4 percent to £0.8330 per euro.
South Korea’s won and Malaysia’s ringgit led weekly gains among Asian currencies on signs global investors are seeking higher returns in emerging markets because of their faster economic growth.
The won rose 0.4 percent this week to 1,199.15 per US dollar in Seoul, according to data compiled by Bloomberg. The ringgit and the Singapore dollar each appreciated by the same amount in the week to 3.1965 and S$1.3709, respectively.
The New Taiwan dollar, which was little changed for the week, gained 0.1 percent to NT$32.152 on Friday.
“Hot money is pouring into the stock market,” said Eric Hsing, a debt trader at First Securities Inc (第一金證券) in Taipei. “The central bank will continue to slow the Taiwan dollar’s growth to keep its edge on exports.”
The Indian rupee climbed 0.4 percent on Friday to 46.945 per US dollar, paring its loss for the week to 0.4 percent, after a report showed investors poured money into equity funds focused on India and China in the week ended Wednesday.
The baht strengthened 0.2 percent on Friday to 32.22 per US dollar, paring its weekly loss, on speculation foreign funds are flowing into Thailand and after the improved profit outlook by US companies eased concern the global economic recovery is faltering.
Elsewhere, Indonesia’s rupiah and Philippine peso are little changed for the week at 9,048 and 46.315 against the US dollar, respectively.
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