The euro weakened against the dollar and pared an advance versus the yen as concern that European nations face difficulty funding debt damped demand.
Europe’s shared currency fell as yields on Spanish 10-year benchmark bonds and French five-year debt rose at auctions, fueling speculation on credit downgrades. The dollar climbed versus the yen as Bank of Japan officials signaled they’ll keep acting to weaken the currency. The greenback advanced against all its major counterparts except the pound and the Taiwanese dollar as weekly U.S. jobless claims were higher than forecast.
“Auction results over the past two weeks show that European sovereigns are still able to place paper, but until there is underlying economic growth, investors are going to continue to demand steep yield premiums for the peripherals and even for France,” said Greg Anderson, the North American head of Group-of-10 nations currency strategy at Citigroup Inc. in New York. “People are building yen positions in anticipation of further easing next week.”
The euro declined 0.1 percent to $1.3106 at 9:26 a.m. New York time. The 17-nation currency was up 0.2 percent to 106.81 yen, after earlier rising as much as 0.7 percent. The dollar appreciated 0.3 percent to 81.49 yen.
Credit-rating companies will probably downgrade France over the next two to three years regardless of whether President Nicolas Sarkozy or his Socialist challenge, Francois Hollande, wins the election, Citigroup’s Michael Saunders wrote in a client note today. The nation may be cut one level by both Standard & Poor’s and Moody’s Investors Service, he wrote. Italy, Spain, Ireland and Portugal also face potential downgrades, he wrote.
Spain sold 2.54 billion euros ($3.33 billion) of two- and 10-year securities today and France raised 10.5 billion euros in debt out of an 11 billion-euro goal. The yield on the 10-year Spanish note was 5.743 percent, compared with 5.403 percent when it was last sold in January. France’s five-year notes yielded 1.83 percent, up from 1.78 percent on March 15.
“The auction today went off quite well, but I think the market is still incredibly skeptical about the funding issues in Europe,” said Boris Schlossberg, director of research at the online currency trader GFT Forex in New York. “The skepticism of the bears seems to have the upper hand; $1.30 is the absolute critical level of the euro-dollar.”
The yen has weakened 8.1 percent this year, the worst performer among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro is the third- biggest decliner, having fallen 0.8 percent.
The Bank of Japan is “committed” to monetary easing, Governor Masaaki Shirakawa said yesterday in a speech in New York. Deputy Governor Kiyohiko Nishimura said the central bank is ready to implement additional easing if necessary.
The Dollar Index (DXY) rose 0.1 percent to 79.683 after more Americans than forecast filed applications for unemployment benefits last week, a sign the improvement in labor-market conditions may be stalling.
Jobless claims fell by 2,000 to 386,000 in the week ended April 14 from a revised 388,000 the prior period that was higher than initially estimated, Labor Department figures showed today in Washington. The median forecast of 47 economists surveyed by Bloomberg News called for a drop to 370,000.
The yield on the Treasury 10-year note fell one basis point, or 0.01 percentage point, to 1.96 percent. Futures on the S&P 500 rose 0.1 percent, and the MSCI World Index of stocks fell 0.1 percent weaker.
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