By Catarina Saraiva and Lukanyo Mnyanda
Dec. 14 (Bloomberg) -- The euro fell below $1.30 for the first
time since January as Italian borrowing costs increased at a debt
auction and Spanish banks’ borrowings from the European Central Bank
climbed by the most in a year.
The 17-nation euro declined to a 10-week low
against the yen as European stocks declined, damping demand for assets
denominated in the euro region’s currency. Norway’s krone weakened after
the Norges Bank cut interest rates for the first time since 2009. The
pound was the biggest gainer against the euro among the major currencies
as investors sought protection from Europe’s sovereign-debt crisis.
“It looks like the euro is going to remain under
periodic bouts of pressure that could be quite acute,” said Ray Attrill,
a senior currency strategist at BNP Paribas SA in New York. “The
European Union summit agreement was seen as the bare minimum.”
The euro slipped 0.3 percent to $1.3001 at 8:39
a.m. New York time, after depreciating to $1.2965, the weakest level
since Jan. 12. The shared currency dropped 0.2 percent to 101.50 yen
after sliding to 101.27, the lowest since Oct. 4. The dollar was little
changed at 78.07 yen.
The Stoxx Europe 600 Index declined 0.9 percent.
Reverse Pressure
The euro’s 14-day relative strength index versus
the dollar weakened to 28.8 today, the lowest level since Oct. 3. A
reading below 30 signals that an asset may be oversold and due to
reverse direction.
Norges Bank cut its main interest rate to 1.75
percent from 2.25 percent, reversing part of a rate-increase cycle that
started in October 2009 as the euro debt crisis threatens growth. The
median estimate of 17 economists in a Bloomberg News survey had
predicted a cut to 2 percent.
The krone was 0.5 percent weaker at 5.9685 per
dollar and fell 0.2 percent to 7.7591 per euro after strengthening 0.2
percent.
The pound rose for a third day against the euro,
the longest run in a month, as stock declines spurred demand for the
perceived safety of the British currency.
“The pound still trades as a semi-safe haven,”
said Elsa Lignos, a currency strategist at RBC Europe Ltd. in
London.
“On days like today, when risk appetite is under pressure, the pound
will benefit.”
Sterling gained 0.3 percent to 83.95 pence per euro, and was little changed at $1.5498.
Italy’s Debt
Italy sold 3 billion euros ($3.9 billion) of
five-year bonds, the maximum target for the auction, and borrowing costs
rose to the highest since 1997 as Parliament prepared to approve a 30
billion-euro emergency budget plan. The Treasury sold the bonds to yield
6.47 percent, up from 6.29 percent at the prior auction on Nov. 14.
Spanish lenders borrowed an average 98 billion
euros from the ECB last month, the most since September 2010, according
to data published by the Bank of Spain on its website. The increase was
the biggest since June 2010 in absolute terms, signaling banks are
struggling to access other sources of finance.
European leaders unveiled a blueprint last week
for a closer fiscal accord to save the currency. They agreed to move up
the creation of the permanent European Stability Mechanism and said that
by March the EU will reassess plans to cap the overall lending of the
ESM and the temporary rescue fund at 500 billion euros.
German
Chancellor Angela Merkel yesterday reiterated her rejection of
increasing the upper limit of funding for the funds.
Euro View
“It’s hard to see a positive scenario for the
euro,” said Kumiko Gervaise, an analyst in Tokyo at Gaitame.com Research
Institute Ltd., a unit of Japan’s largest online currency
margin-trading company.
The Dollar Index, which IntercontinentalExchange
Inc. uses to track the U.S. currency against those of six trading
partners, rose 0.3 percent to 80.435.
The Federal Reserve’s policy-setting panel, which
met in Washington yesterday, said the economy “has been expanding
moderately,” compared with the Nov. 2 assessment that growth
“strengthened somewhat.” The central bank also said “strains in global
financial markets continue to pose significant downside risks to the
economic outlook.” It refrained from taking new action to lower
borrowing costs.
The dollar has appreciated 5.2 percent in the
past three months, according to Bloomberg Correlation-Weighted Indexes,
which track 10 developed-nation currencies. The euro slipped 0.9 percent
and the yen gained 1.3 percent.
--Editors: Paul Cox, Dave Liedtka
To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net;
Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
