The euro gained versus most of its major counterparts, rebounding from a two-month low versus the dollar, after U.S. retail sales rose more than forecast, buoying demand for higher-yielding assets.
The 17-nation currency fell earlier below $1.30 for the first time since February as Spanish bond yields touched a 2012 high, fueling concern Europe’s debt crisis is spreading. Norway’s krone gained the most against the dollar as crude oil rose. South Korea’s won was the biggest loser as the Bank of Korea cut its 2012 economic growth forecast to 3.5 percent, from 3.7 percent.
“You’ve seen the turnaround in stocks, so you have that correlation,” said David Grad, a foreign-exchange strategist at Bank of America Corp. in New York. “Euro concern is definitely back. Euro downside has been very popular, and so breaking back above $1.31 was probably technical.”
The euro rose 0.5 percent to $1.3142 at 4:43 p.m. in New York after falling earlier to as low as $1.2995, the weakest level since Feb. 16. It was down 0.2 percent to 105.67 yen after dropping to as low as 104.63, the weakest since Feb. 20. Japan’s currency gained 0.7 percent to 80.41 to the dollar.
The Norwegian krone appreciated 0.7 percent to 5.7458 per dollar. Norway is the world’s seventh-biggest oil exporter. The South Korean won weakened 0.3 percent to 1,138.63 to the dollar in its first decline in three days.
The Dow Jones Industrial Average rose 0.6 percent. The Standard & Poor’s 500 Index ended the day little changed after falling earlier as much as 0.4 percent. Crude oil for May delivery gained as much as 0.5 percent to $103.37 a barrel in New York before trading at $103.13, up 0.3 percent.
U.S. retail sales increased 0.8 percent in March, 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 was for an advance of 0.3 percent.
The euro slid earlier against the yen and the dollar 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 the European Central Bank 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 of 521, CMA data show.
Spanish Debt Sales
Spain will sell 12- and 18-month bills tomorrow, followed by auctions on April 19 of debt maturing in October 2014 and January 2022.
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 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.
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 6.5 percent, and the dollar rose 4.3 percent.
The dollar rose earlier as the U.S. retail sales data damped speculation the Federal Reserve will add to monetary easing.
Fed Policy Makers
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 FOMC begins a two-day policy meeting on April 24.
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.
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