By EVA SZALAY
The euro sank to a seven-week low against the dollar on a shockingly poor German government bond auction.
Germany sold only €3.6 billion of the €6 billion in 10-year benchmark
bonds on offer, sparking worries that the euro-zone debt crisis might
even be spreading to its hitherto solid core.
"I cannot recall a worse auction," said Marc Ostwald, a rates
strategist at Monument Securities in London. "If Germany can only manage
this sort of participation, what hope for the rest?"
A German Finance Agency spokesman said the auction reflected a
nervous market but the "result doesn't mean any refinancing bottleneck
for the budget."
Around the same time as the German sale, the Bank of Greece said the
country risked a disorderly exit from the euro zone, adding to the
pressure on the euro. Midday in New York, it stood at $1.3347, down from
$1.3505 late Tuesday in New York and just above the day's low of
$1.3326, its lowest level since Oct. 6.
Concerns over the euro zone's debt woes have kept the common currency
under pressure in the past few days, and weak Chinese and euro-zone
data released Wednesday had already fanned concerns about the health of
the global economy. But the poor auction suggests the crisis may have
reached a tipping point where confidence in the euro-zone project as a
whole, including Germany, is running out.
"It's an overdue sell-off," said Todd MacDonald, head of foreign
exchange trading at Standard Chartered in New York. He said he expects
the euro to fall to $1.3150 over the next week.
A closely watched euro-zone survey indicated that private-sector
activity declined for a third straight month in November. Markit
Economics said the composite Purchasing Managers Index for the euro zone
rose to 47.2 from 46.5, remaining below the 50.0 level that
distinguishes expansion from contraction.
Data also showed industrial orders around the 17 countries that share
the euro fell in September at the fastest pace since December 2008.
"The euro area economy is faced with strong headwinds from ongoing
fiscal consolidation and the deleveraging in the bank sector, which is
likely to weigh on both investments and private consumption," Danske
Bank said in a note to clients.
In addition, China's November HSBC flash manufacturing PMI fell 3
points to a 32-month low 48. A level below 50 signals contraction.
Separately, the Bank of Greece, in a starkly worded interim monetary
policy report for 2011, said the latest European Union-led bailout
package for the country represented a last chance for the country to
make good its reform program.
Failure to do so would lead to "an uncontrolled downward trajectory
that would undermine many of the achievements that have been attained in
recent decades, drive the country out of the euro area and set Greece's
economy, standard of living, society and international standing back
many decades," it said.
Meanwhile, Belgium's De Standaard newspaper said Belgium, unable to
meet the terms of the rescue plan for Franco-Belgian bank Dexia, is
asking France to renegotiate and a greater French burden is a "possible
outcome." The report, which didn't cite any sources, said Belgian and
French officials denied they are renegotiating the dismantling of Dexia.
The report rekindled talk that France's triple-A credit rating might be in danger.
Among other currencies, the dollar was at ¥77.41, up from ¥76.97 late
Tuesday. The dollar was at 0.9202 Swiss franc, from 0.9141 franc, and
the U.K. pound was at $1.5509, down from $1.5634.
Japanese markets were closed for a holiday.
—Anusha Shrivastava contributed to this article.
