The euro touched the lowest level against the yen since February as Spanish bond yields touched a 2012 high after a minister called on the European Central Bank to do more to stem debt-market turmoil.
The 17-nation currency reached below $1.30 for the first time in two months before rising against most major peers as risk appetite improved and stocks erased losses. Norway’s krone and the South African rand strengthened as U.S. retail sales rose more than forecast, boosting confidence in the recovery of the world’s biggest economy.
“The market is growing increasingly nervous about Spain and Italy in particular,” said Omer Esiner, chief market analyst in Washington at Commonwealth Foreign Exchange Inc., a currency brokerage. “We’ve seen some of the risk-off sentiment dissipate a little bit. The dollar, which had been up overnight, is now under pressure against the euro and some of the commodity currencies.”
The euro fell 0.1 percent to 105.71 yen at 2:10 p.m. in New York after dropping earlier to 104.63, the weakest since Feb. 20. The shared currency rose 0.5 percent to $1.3138 after falling to as low as $1.2995. The euro was little changed at 82.59 U.K. pence after reaching 82.10 pence earlier, the lowest since September 2010. The yen appreciated 0.6 percent to 80.46 per dollar and touched 80.30, the strongest level since Feb. 29.
Norway’s krone gained 0.7 percent to 5.7490 per dollar, and the South African rand added as much as 0.4 percent to 7.9139 before trading at 7.9426, up 0.1 percent.
The Standard & Poor’s 500 Index rose 0.3 percent after falling as much as 0.4 percent.
The euro slid against the yen after the cost of insuring Spain’s debt reached a record and Jaime Garcia-Legaz, the nation’s deputy economy minister, said in an interview on April 13 that the ECB should “step up purchases of bonds.”
Spanish 10-year bond yields jumped as much as 18 basis points, or 0.18 percentage point, to 6.16 percent, the highest level since Dec. 1, before trading at 6.06 percent. Five-year credit-default swaps linked to Spanish bonds jumped to an all- time high, CMA data show. Spain will sell 12- and 18-month bills tomorrow, followed by auctions of debt due in October 2014 and January 2022 on April 19.
Prime Minister Mariano Rajoy is struggling to convince investors he can get Spain’s finances under control after last month refusing to meet deficit targets set by the European Commission and the previous government.
Italian 10-year bond yields reached 5.67 percent, approaching a two-month high.
The euro lost 5.7 percent over the past year, according to Bloomberg Correlation Weighted Indexes, the worst performer among the 10 developed-nation currencies tracked by the gauges. The yen gained 6.4 percent, and the dollar rose 4.2 percent.
“The euro is under a bit of pressure with the periphery in focus, particularly as we have some Spanish issuance this week,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “The path of least resistance is still lower, and we’re probably looking for euro-yen to lead the way.”
The dollar rose earlier versus most major counterparts as data showed U.S. consumer purchases rose last month, damping speculation the Federal Reserve will add to monetary easing.
Retail sales increased 0.8 percent, following a revised 1 percent advance in February, Commerce Department figures showed today in Washington. The median forecast of 81 economists surveyed by Bloomberg News called for a rise of 0.3 percent. Eleven of 13 categories showed gains.
Four members of the Federal Open Market Committee judged that monetary policy should be tightened from 2015, while two preferred 2016, according to a Jan. 25 statement from the Fed. The central bank bought $2.3 trillion of bonds from 2008 to 2011 in two rounds of quantitative easing.
The euro may fall to as low as $1.2805 after breaking below a key level of support today, according to Credit Suisse AG.
The currency is poised to weaken to the 78.6 percent Fibonacci retracement of its rally in the first quarter after declining through the so-called head-and-shoulders neckline at $1.3030, Steve Miley, director of technical analysis in London, said in a telephone interview.
Support refers to an area where buy orders may be clustered. A head and shoulders is formed when a currency makes three consecutive peaks, with the middle being the highest. A neckline is drawn across the base of the three peaks. Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low.
China’s yuan tumbled against the dollar as the central bank doubled the daily trading band, reflecting declines in emerging- market currencies.
Effective today the People’s Bank of China is allowing 1 percent moves from its daily fixing, after keeping the limit at 0.5 percent since May 2007.
“The yuan is weaker as investors are again worried about Europe and a bit on China’s growth,” said Tommy Ong, Hong Kong- based senior vice president of treasury and markets at DBS Bank (Hong Kong). “It’s an opportune time for China to widen the band when appreciation expectations aren’t so strong.”
China’s currency weakened 0.2 percent to 6.315 per dollar.
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