Bloomberg News

Euro Weakens Amid European Discord on Funding; Dollar Advances

November 05, 2011

Nov. 4 (Bloomberg) -- The euro fell against the dollar, registering its biggest weekly loss in almost two months, as Group of 20 leaders failed to agree on funding to support European governments’ efforts to contain their debt crisis.

The dollar rose against 14 of its 16 most-traded counterparts after the Commerce Department reported the U.S. unemployment rate fell while nonfarm payrolls expanded less than forecast. Canada’s currency tumbled after the nation’s employers unexpectedly eliminated jobs.

“The headlines are still being dominated by the G-20 and Europe, so people are wary about taking on new positions or adding risk on,” said Mark McCormick, a New York-based currency strategist at Brown Brothers Harriman & Co. “It’s still dollar- positive, as international coordination is not really going to solve the euro-zone debt problem.”

The euro depreciated 0.2 percent to $1.3792 at 5 p.m. New York time, after falling earlier as much as 0.8 percent. The yen was little changed at 107.88 per euro, and the dollar rose 0.2 percent versus the Japanese currency to 78.24 yen.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major trade partners including the euro and yen, rose 0.2 percent to 76.915.

The euro pared its declines as commodities reversed a retreat. The Thomson Reuters/Jefferies CRB Index was up 0.1 percent after falling earlier as much as 0.5 percent. The Standard & Poor’s 500 Index tumbled as much as 1.8 percent before trimming the loss to 0.6 percent.

‘Tug of War’

The U.S. currency strengthened 2.6 percent against the euro this week, its biggest five-day gain in almost two months, as investors sought safety amid concern Greece is headed for default and the sovereign-debt crisis will cause euro-area growth to contract.

“There is a tug of war between the impulse to buy risk and the pro-dollar move,” said Boris Schlossberg, director of research at the online currency trader GFT Forex in New York. “It’s a relatively buoyant NFP number, with the revisions upward relatively positive. The picture is very muddied by what’s going on the opposite side of the Atlantic.”

U.S. employers added 80,000 jobs in October following gains in the prior two months that were revised higher by 102,000, Labor Department figures showed today in Washington. Economists in a Bloomberg survey forecast a 105,000 increase last month.

The unemployment rate fell to a six-month low of 9 percent from 9.1 percent.

‘Very Mixed’

“It was chaotic because the headline disappointed expectations, but the details were better than the headline would have suggested with the revision up,” Camilla Sutton, a Bank of Nova Scotia currency strategist in Toronto, said in a telephone interview. “It was very mixed. That’s why we’ve had a bit of a chaotic response.”

The Canadian currency, nicknamed the loonie for the image of the bird on the C$1 coin, dropped 1.2 percent to C$1.0188 per U.S. dollar, extending its first weekly decline since September to 2.7 percent.

Employment in Canada fell by 54,000 jobs last month after an increase of 60,900 in September, the nation’s statistics agency reported today. Two days ago, Bank of Canada Governor Mark Carney reiterated the outlook for the Canadian economy has weakened since July. Economists in a Bloomberg survey forecast an increase of 15,000 jobs in October.

The euro lost 3.4 percent over the past six months against nine developed-nation counterparts, according to Bloomberg Correlation-Weighted Currency Indexes. The dollar gained 4.3 percent and the yen advanced 6 percent, while the Canadian dollar fell 2.9 percent.

Awaiting Details

German Chancellor Angela Merkel said today on the final day of the G-20 summit in Cannes, France, that leaders failed to agree on International Monetary Fund resources to buttress the region’s efforts to contain the debt crisis. They’re awaiting more details of a week-old rescue package before they commit cash to the IMF, which could then lend to Europe’s bailout facility, she said. French President Nicolas Sarkozy said it may take until February for a deal.

The refusal of major economies to stump up money now reflected irritation with Europe’s failure to resolve its crisis alone and foiled investor hopes that the summit would mark a turning point.

Greece’s ruling-party lawmakers urged Greek Prime Minister George Papandreou to step aside and allow the formation of a new government that can approve a European Union aid package needed to avert default.

The largest opposition party rejected Papandreou’s offer to form a national government, raising the prospect of elections that may delay aid needed to prevent default. He earlier scrapped a referendum on the bailout accord to avert a split in his party before a confidence vote today.

Swiss Franc

The Swiss franc snapped a two-day gain after Swiss National Bank Governing Board member Jean-Pierre Danthine said in Geneva yesterday the currency remains strong even at a rate of 1.20 per euro. The central bank on Sept. 6 imposed a cap of 1.20 francs per euro after the currency, traditionally a refuge for investors, surged to a record, threatening exports.

The franc dropped 0.5 percent to 1.2200 per euro. It strengthened to a record 1.0075 on Aug. 9.

The Australian dollar fell for the first time in three days after the Reserve Bank lowered its forecasts for economic growth and inflation forecasts for the next two years. The currency depreciated 0.4 percent to $1.0375.

The RBA said it saw growth of 4 percent in the 12 months to June 30, 2012, down from its Aug. 5 estimate of 4.5 percent.

--With assistance from Keith Jenkins in London and Chris Fournier in Halifax. Editors: Greg Storey, Dave Liedtka

To contact the reporters on this story: Allison Bennett in New York at abennett23@bloomberg.net; John Detrixhe in New York at jdetrixhe1@bloomberg.net.

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


Tim Cook's Reboot
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus