The euro fell against the yen to the weakest level in more than 11 years as investors sought the relative safety of the Japanese currency and pushed German bond yields to record lows amid a deepening of Europe’s debt crisis.
The Dollar Index climbed to a 21-month high after Chinese manufacturing grew less than forecast last month and before a report that U.S. payrolls probably picked up from the weakest pace in six months. The 17-nation currency slid to the lowest in almost two years against the dollar after euro-area unemployment surged to the highest on record.
“We’ve definitely seen an intensification of the euro-zone crisis,” said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. (BK:US) in London. “What you’ve seen is people saying where were the true safe havens are, and coming to the conclusion that ultimately there really were only two, Japan or the U.S.” Derrick said they have $1.17 targeted against the euro.
The euro tumbled 0.6 percent to 96.32 yen at 8:02 a.m. New York time after reaching 96.17 yen, the weakest since Nov. 30, 2000. The shared currency fell 0.3 percent to $1.2323 after depreciating to $1.2312, the least since July 1, 2010. The U.S. currency was 0.2 percent lower at 78.19 yen.
Yields on German two-, five-, 10- and 30-year bonds dropped to records today, as did those on 10-year Treasuries and British gilts.
The 17-nation currency posted its ninth daily decline against the yen, the longest losing streak since March 2000, after a report showed unemployment in the euro area reached 11 percent in April and March, the highest since the data series started in 1995.
Italian Prime Minister Mario Monti and ECB President Mario Draghi pushed Germany to give up its opposition to direct euro- area aid for struggling banks.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, gained as much as 0.4 percent to 83.39, the highest level since August 2010.
China’s manufacturing Purchasing Managers’ Index fell to 50.4, it’s the weakest reading since December, last month from 53.3 in April, the statistics bureau and logistics federation said in a statement today in Beijing.
The dollar’s advance was limited before a report economists said will show hiring in the U.S. picked up in May. Payrolls climbed by 150,000 workers following a 115,000 April increase, according to the median forecast of 86 economists surveyed by Bloomberg News. The unemployment rate held at a three-year low of 8.1 percent, a separate survey showed.
The Citigroup Economic Surprise Index for Group-of-10 nations, which measures how much reports are missing or beating the median estimates in Bloomberg surveys, slid to minus 37 today, the least since September.
The Dollar Index (DXY) may be poised for further gains after it breached the 61.8 percent Fibonacci retracement level of its decline from a high of 88.708 on June 7, 2010, to a low of 72.696 on May 4, 2011, according to BNP Paribas SA. “The U.S. dollar remains supreme,” the bank said in a report today.
The gauge surpassed the retracement level of 82.591 on May 30, according to data compiled by Bloomberg.
The U.S. currency has advanced 3.7 percent this year, the best performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen has climbed 1.8 percent and the euro declined 2 percent.
The yen earlier fell after Japan’s Finance Minister Jun Azumi pledged to take “decisive” action if excessive gains in the currency persist.
Azumi’s comments fueled speculation officials are preparing to intervene in currency markets.
“We will continue to carefully monitor currency market moves with more caution,” Azumi told reporters in Tokyo today. “If these excessive moves continue, I think I must take decisive action” on the yen, he said.
The last time Japan intervened in the currency market to stem the yen’s appreciation was on Nov. 4. Japanese officials sold at least 14.3 trillion yen last year to stem currency strength that is forcing exporters to cut labor costs as they lose customers to their overseas rivals.
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