Monday, 10 December 2012

Euro Near 2-Week Low After Italy’s Monti Says He May Quit

By Anchalee Worrachate & Kristine Aquino - Dec 10, 2012 2:00 PM GMT+0400

The euro fell toward a two-week low against the dollar after Italy’s prime minister said he intends to resign, rekindling speculation a change in government will derail efforts to solve the nation’s debt crisis.
The 17-nation currency dropped for a third day versus the yen before European Union leaders meet this week to debate a road map for the overhaul of the euro area. The yen strengthened against most of its major counterparts as investors sought out safer assets. The Australian dollar weakened after China reported lower trade data than economists forecast. Canada’s currency rose to the strongest level in seven weeks against the U.S. dollar.
Currency Strategists Disagree on Euro, Yen OutlookThe euro fell 0.1 percent to $1.2913 as of 6:41 a.m. in London. Photographer: Kiyoshi Ota/Bloomberg
Dec. 10 (Bloomberg) -- Steven Saywell, global head of foreign-exchange strategy at BNP Paribas SA, and Nick Beecroft, chairman of Saxo Capital Markets U.K. Ltd., discuss the prospects for the euro, yen, Swiss franc and pound in 2013. They talk with Mark Barton on Bloomberg Television's "Countdown." (Source: Bloomberg)
Italy's Prime Minister Monti Mario Monti, Italy's prime minister. Photographer: Alessia Pierdomenico/Bloomberg
“The political situation in the Italy has added to uncertainty inEurope,” said Jane Foley, a senior currency strategist at Rabobank International in London. “This political uncertainty may linger for a while and that could be negative for the euro in coming months.”
The euro declined 0.2 percent to $1.2898 at 10 a.m. in London after sliding to $1.2877 on Dec. 7, the weakest level since Nov. 23. The common currency fell 0.5 percent to 106.12 yen. The yen appreciated 0.2 percent to 82.27 per dollar.
Italian Prime Minister Mario Monti is seeking to convince his coalition, which includes his predecessor Silvio Berlusconi’s People of Liberty Party, to vote to pass budget legislation before handing in his “irrevocable resignation,” national President Giorgio Napolitano’s office said Dec. 8.

Monti Undermined

Monti’s popularity has been undermined as his tax increases push Italy deeper into recession. Berlusconi announced on Dec. 8 that he will seek the premiership in next year’s election and criticized Monti for running a “German-centric” program.
Italian bonds dropped, with 10-year yields jumping 28 basis points, or 0.28 percentage point, to 4.81 percent. The yield is still below its closing level of 7 percent on Nov. 16, 2011, when Monti was named prime minister.
“In the near term at least, it does look like the euro wants to go lower,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp. (WBC) The report that Monti may quit “impacts the euro because it’s evidence of more political instability within the zone.”
The euro depreciated 2.6 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. That made it the worst performer after the yen which declined 9.3 percent. The greenback dropped 2.3 percent.

EU Meeting

European Union heads of state and government will meet at a summit in Brussels on Dec. 13-14 to discuss measures to end the crisis, including increased powers to intervene in national budgets and the establishment of a single banking supervisor. Finance ministers will convene first, on Dec. 12.
The U.S. Federal Open Market Committee meets for the last time this year on Dec. 11-12. It will consider whether to expand purchases of assets after its so-called Operation Twist program of swapping $45 billion a month in short-term Treasuries for long-term debt expires this month.
“There’s a good chance that the Fed will announce a new round of money printing and bond buying,” which would be negative for the dollar, Westpac’s Speizer said.
Australia’s dollar fell for the first time in five days against the yen as Chinese export and import figures damped the outlook for the South Pacific nation’s prospects.

China Data

China’s exports rose 2.9 percent in November from a year earlier while imports were unchanged, the customs administration said in Beijing. Economists surveyed by Bloomberg forecast exports would rise 9 percent and imports gain 2 percent.
“There was disappointment on the Chinese trade data,” Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “We have seen strong data out of China in recent sessions, but with today’s weaker data would put some question marks as to whether the rebound in the economy is sustainable and if China’s demand for Australian goods will continue.”
The so-called Aussie dropped 0.3 percent to 86.23 yen, and slid 0.1 percent to $1.0474.
Canada’s dollar strengthened after the government approved Cnooc Ltd.’s $15.1 billion purchase of energy company Nexen Inc. and signed off on Malaysian Petroliam Nasional Bhd.’s purchase of Progress Energy Resources Corp.
The Canadian currency appreciated to 98.65 cents per U.S. dollar, the strongest since Oct. 19, before trading little changed at 98.83 cents.
To contact the reporters on this story: Anchalee Worrachate in London at; Kristine Aquino in Singapore at;
To contact the editor responsible for this story: Paul Dobson at