June 22 (Bloomberg) -- The euro fell from a one-week high against the dollar on speculation Greek Prime Minister George Papandreou will struggle to pass an austerity package through parliament even after winning a confidence vote.
Europe’s single currency declined versus 14 of its 16 major counterparts before Papandreou seeks approval next week for a 78 billion-euro ($112 billion) package of budget cuts and asset sales. The dollar strengthened against higher-yielding currencies on speculation Europe’s fiscal woes will slow global growth. Norway’s krone weakened before the central bank meets today to review interest rates.
“The prime minister survived and that’s a good sign because you have a functioning government but they still need to pass legislation for the austerity measures,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia, the nation’s biggest lender. “The euro had priced in a lot of the good news and so it’s come off a bit and will likely fall a little further.”
The euro weakened to $1.4390 as of 6:45 a.m. in Tokyo from $1.4412 in New York yesterday, after earlier rising to $1.4434, the strongest since June 15. The shared currency fell to 115.51 yen from 115.60 yen.
The dollar gained 0.1 percent to $1.0595 per Australian dollar, and rose as much as 0.6 percent against the Norwegian krone before trading at 5.4967 from 5.4866. The greenback was little changed at 80.26 yen.
European finance ministers said this week they would hold off on approving a 12 billion-euro payment to Greece promised for July until passage of plans to cut the deficit, sell state assets and impose a “crisis levy” on wages. The aid is part of last year’s 110 billion-euro bailout from the European Union and the International Monetary Fund.
Police used tear gas and stun grenades to disperse thousands of citizens protesting planned budget cuts after yesterday’s Greek confidence vote.
Papandreou will meet his ministers today to discuss a draft law for the government’s five-year fiscal plan, one of two laws that need to pass by the end of the month to qualify for EU aid. He will talk to counterparts at a summit in Brussels starting tomorrow that will discuss a new financing package.
The IMF, contributor of a third of the bailout money for Greece and the two other euro-area countries that have received bailouts, Ireland and Portugal, has warned EU leaders a failure to take decisive action on the debt crisis risks triggering “large global spillovers.”
“What they’re trying to put through in Greece is longer term and there’s a big long road from here,” said Alex Sinton, a senior dealer at ANZ National Bank Ltd. in Auckland, New Zealand. “The euro is vulnerable.”
The euro will find buyers toward the $1.433 level today, Sinton said. The median forecast of economists in a Bloomberg News survey is for it to weaken to $1.41 by year-end.
Norway’s krone dropped on speculation the central bank will scale back plans to raise borrowing costs over the next year as Europe’s debt crisis threatens to sap a rebound in global growth.
The central bank is trying to cool a recovery in the world’s second-richest nation per capita that has fueled credit growth and sent property prices higher. At the same time, policy makers have signaled they don’t want rate increases to fan krone gains that hurt trade.
“We expect a somewhat more dovish tone in particular for policy in 2012-2013,” Barclays Capital analysts including London-based Piero Ghezzi, head of economics, emerging market and currency research, wrote in a research note today.
Gains in the dollar were tempered before the Fed ends a two-day policy meeting today and Chairman Ben S. Bernanke holds a press conference. Policy makers will keep the benchmark at zero to 0.25 percent, where it’s been since December 2008, according to economists surveyed by Bloomberg.
The committee will “firm up” language around keeping borrowing costs low for an extended period and apply that to its balance sheet as well, BNP Paribas SA analysts led by New York- based Ray Attrill wrote in a note to clients.
The Fed is scheduled to end its $600 billion second round of bond-buying or so-called quantitative easing this month. Futures show the likelihood policy makers will increase the target rate by March 2012 dropped to 21 percent from 30 percent a month ago.
“I don’t think the FOMC decision will support the dollar,” said Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney. “While they will signal the end of the current quantitative easing scheduled end of June, that’s fully anticipated.”
U.S. home prices fell 0.3 percent in April, according to a Bloomberg survey before the Federal Housing Finance Agency report today. Purchases of existing houses decreased 3.8 percent to a six-month low in May, the National Association of Realtors said yesterday.
-- With assistance from Masaki Kondo in Singapore. Editors: Nicholas Reynolds, Nate Hosoda
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