The euro fell versus the majority of its 16 most-traded counterparts amid speculation a Greek austerity plan and a European Union pledge to stabilize the region’s economy won’t resolve its sovereign-debt crisis.
The yen, Swiss franc and dollar rose against their major peers as a lawmaker from Greece’s ruling Pasok party said he hasn’t decided to vote for the country’s new fiscal measures and Italian bank stocks slumped amid concern the crisis may spread. South Africa’s rand tumbled on prospects for the euro region, the nation’s largest trading partner. Australia’s dollar advanced as a central bank official said inflation may quicken. “Greece concerns and Italian banks are what the market is focusing on,” said Camilla Sutton, head of currency strategy at Bank of Nova Scotia in Toronto. “Everyone is just reacting to headlines. News from Europe will outweigh any economic data that comes out in the next few weeks.”
The euro dropped 0.7% to 113.98 yen in New York, from 114.78 yen on Thursday. It fell 0.6% to 1.1886 Swiss francs, after reaching a record-low 1.1846 on Thursday. The euro weakened 0.4% to $1.4197, from $1.4256. The dollar depreciated 0.3% to 80.29 yen, from 80.51 yen.
South Africa’s currency was the biggest loser against the dollar, falling 0.8% to 6.8872 per dollar, from 6.8358. It was poised for a weekly decline of 1.9%.
The rand dropped 0.3% to 9.7760 per euro, from 9.7477. The euro region accounts for 45% of South Africa’s exports and 34% of its imports, government data show. The rand closely tracks the euro, with a correlation of 0.683 this quarter. A value of 1 would mean they moved in lock step. The shared currency weakened as Italy’s two largest banks, UniCredit SpA and Intesa Sanpaolo SpA, led a drop in bank stocks in Milan. Trading in both firms’ shares was briefly suspended after breaching limits on intraday swings.
Moody’s Investors Service said on Thursday it may downgrade 13 Italian banks because they would be vulnerable to a cut in the government’s credit rating. The firm said last week Italy’s ratings may be cut because of slowing economic growth and the potential for Europe’s debt crisis to drive up borrowing costs.
Italian 10-year bonds fell, increasing the additional yield investors demand to hold the securities instead of benchmark German bunds to 2.14 percentage points, the most since the euro was introduced in 1999.
EU leaders vowed to stave off a Greek default as long as Prime Minister George Papandreou, who won a confidence vote this week, pushes through a package of budget cuts and asset sales. “There’s nothing going on but euro today,” said Andrew Wilkinson, senior market analyst at Interactive Brokers Group LLC in Greenwich, Connecticut. “Everybody seems to know what’s expected over the next few days; the difficulty is achieving it. The passage of the confidence vote was pretty slim, and all of Papandreou’s party members backed it, but you can’t assume the same will happen now.” Greek lawmakers must approve the 78 billion-euro ($111 billion) austerity package in a vote next week to receive a fifth loan payment under an existing bailout, as well as future financing. Papandreou won a confidence vote by 155-143 this week. Failure to secure aid would push Greece to the brink of default, with the country needing the funds to cover 6.6 billion euros of maturing bonds in August.
Thomas Robopoulos, a lawmaker from the Pasok party, said he hasn’t decided whether he’ll vote for the government’s medium—term fiscal plan and implementation law next week. He said by telephone on Friday he’s leaning toward voting against it.
Meanwhile, Morgan Stanley strategists advised selling the euro against the dollar, betting it will weaken to $1.36.
Despite the progress currently being made regarding providing aid packages to Greece, many hurdles still remain, a team led by Hans Redeker, head of foreign-exchange strategy, wrote in an e-mailed report.
Source:-
http://www.livemint.com/2011/06/24222744/Euro-falls-versus-most-major-p.html?atype=tp
Thanks
Ankit Wani
Intern @ DENIP Consultants Pvt. Ltd.
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