Bloomberg News

Euro Falls as Italy’s Monti Warns of Crisis Divisions

August 06, 2012

Yen, Dollar Decline Against Most Peers on Global Stock Advances

The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, dropped as much as 0.3 percent to 82.080, a level unseen since July 4. Photographer: Jin Lee/Bloomberg

(Corrects to remove Swedish data survey in second paragraph.)

The euro fell against the yen and dollar after Italy’s Prime Minister Mario Monti said divisions over the debt crisis are threatening the continent’s future, amid German opposition to sovereign-bond purchases.

Europe’s common currency slipped from its strongest level in three weeks against the yen after a report showed European investor confidence dropped for a fifth month in August as the region grapples with the almost three-year-old financial turmoil. Sweden’s krona had the biggest decline against the dollar among 16 major currencies after a report showed service production declined in June from a month earlier.

“The euro is looking wobbly again,” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “There’s still a great deal of residual uncertainty about all events European.”

The euro dropped 0.2 percent to 96.99 yen at 10:28 a.m. London time, after touching 97.80, the strongest since July 12. It lost 0.2 percent to $1.2366 after gaining as much as 0.5 percent to $1.2444, the most since July 5. The U.S. currency slipped 0.1 percent to 78.43 yen.

“The tensions that have accompanied the euro zone in the past years are already showing signs of a psychological dissolution of Europe,” Monti told Germany’s Spiegel magazine in an interview published yesterday. He urged swift action to lower bond yields in the region’s peripheral nations.

Draghi Plan

European Central Bank President Mario Draghi last week outlined a plan under which the central bank may buy debt in tandem with the euro governments’ bailout fund, while saying the details still need to be worked out over the coming weeks. Bundesbank President Jens Weidmann said in an interview published a day before Draghi’s comments that the ECB shouldn’t exceed its mandate.

An index measuring sentiment in the 17-nation euro region slid to minus 30.3, from minus 29.6 in July, Limburg, Germany- based Sentix said in an e-mailed statement today.

“There are worries about worsening economic fundamentals as European countries move toward austerity,” said Kengo Suzuki, a currency strategist in Tokyo at Mizuho Securities Co., a unit of Japan’s third-largest bank by market value. “The euro will grind lower in the medium-to-longer term.”

The Swedish krona fell 0.5 percent to 6.7407 per dollar and was 0.4 percent weaker at 8.3381 against the euro.

Swedish service production fell 0.2 percent from May, when it gained 2.3 percent, Statistics Sweden said today in a press release. Production rose an annual 1.1 percent, compared with May’s 1.9 percent jump.

The Dollar Index (DXY), which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, gained 0.2 percent to 82.451, rallying from its weakest since July 4.

To contact the reporter on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net


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