Bloomberg News

Euro Drops on Italian Bond Sale, Bets Leaders Won’t Stem Crisis

November 29, 2011

Nov. 29 (Bloomberg) -- The euro dropped against most of its major counterparts after Italy paid more than 7 percent in its debt auctions and on speculation European leaders won’t agree on how to stem the region’s debt crisis.

The shared currency erased gains versus the dollar after the European Central Bank failed to offset the extra liquidity created by its bond purchase program. Euro-area finance ministers are meeting today to seek a resolution to debt turmoil. Higher-yielding currencies, such as the Australian and Canadian dollars, rose. Sweden’s krona rallied after gross domestic product expanded more than analysts estimated.

“People are going to be looking at the euro group meeting today, and I don’t think it’s much of a game-changer,” said Mark McCormick, a currency strategist at Brown Brothers Harriman & Co. in New York. “It’s a risk-on day, so the currencies that have been sold off the hardest are likely to be the biggest advancers.”

The euro was little changed at $1.3326 at 8:54 a.m. New York time, after earlier gaining to as high as $1.3442. It declined 0.2 percent to 103.64 yen. The dollar dropped 0.3 percent to 77.77 yen.

Australia’s dollar rallied for a second day, gaining 0.9 percent to 99.95 U.S. cents, paring its drop this month to 5.1 percent. Canada’s dollar appreciated 0.4 percent to C$1.0304 per U.S. dollar.

The ECB failed to fully offset the extra liquidity created by its bond purchases for the first time in seven months, a sign of mounting tensions among euro-area banks.

The central bank said 85 banks bid a total of 194.2 billion euros ($259.4 billion) for seven-day term deposits. It had aimed to drain 203.5 billion euros, the amount its bond purchases have created since the program began in May last year.

--With assistance from Paul Dobson in London. Editors: Greg Storey, Dennis Fitzgerald

To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net

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


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