Feb. 11 (Bloomberg) -- The euro tumbled against all of its most-traded counterparts after an agreement brokered by the European Union to help Greece weather its debt crisis offered few details.
The 16-nation common currency slid as a statement issued by European leaders left open how the EU would respond to a fresh wave of speculative attacks against Greece or countries such as Spain and Portugal, which are also struggling to cut their budget deficits. Australia’s dollar gained after the country’s jobless rate unexpectedly fell last month and Chinese bank lending increased.
“We don’t have a lot of detail about what the structure of any aid or bailout is going to be,” said George Davis, chief technical analyst at Royal Bank of Canada in Toronto. “Given the state of their finances, any agreement for aid will come with conditions of what Greece has to do to get its house in order and we may see a push lower in the euro.”
The euro dropped 1 percent to $1.3606 at 11:10 a.m. in New York, from $1.3737 yesterday. It slid 1.1 percent to 122.22 yen from 123.56 yesterday. The greenback declined 0.1 percent to 89.83 yen from 89.94 yesterday.
“Euro-area member states will take determined and coordinated action if needed to safeguard financial stability in the euro area as a whole,” EU President Herman Van Rompuy told reporters today in Brussels. “We fully support the efforts of the Greek government and their commitment to do whatever is necessary including adopting additional measures.”
‘Halved By the Crisis’
The region’s common currency fell 5 percent against the dollar this year on concern that nations with the biggest debt burdens may struggle to meet their obligations. Greek Prime Minister George Papandreou’s drive to bring his country’s increasing budget under control was yesterday challenged in the streets as labor unions closed schools, hospitals and airports.
“The strains in Europe could delay an exit from easy money policy,” said Todd Elmer, currency strategist at Citigroup Inc. in New York. “It exacerbates widening spreads in favor of the U.S. The cyclical underperformance of euro area will pull currency down.”
The euro slid against the greenback after Bundesbank President Axel Weber said he can’t rule out that the German economy will contract in the first quarter, Reuters reported, citing an interview. He also said that current interest levels are “appropriate.”
European Commission President Jose Barroso said in a presentation released by his office that reduced bank lending is holding back economic recovery in Europe and that the region’s growth potential has been “halved by the crisis.”
Aussie Gains
Australia’s dollar rose to a one-week high against the yen after a report showed employers added three times as many jobs as economists forecast, increasing pressure on the central bank to raise interest rates for a fourth time, and China’s reported lower-than-expected inflation. The Reserve Bank of Australia unexpectedly kept its benchmark rate at 3.75 percent on Feb. 2 after three straight increases.
The number of people employed in Australia climbed by 52,700 in January, the statistics bureau said. Analysts predicted an increase of 15,000. The jobless rate fell to 5.3 percent from 5.5 percent.
China’s inflation rate fell to 1.5 percent last month from 1.9 percent in December, a report showed, less than the 2.1 percent median estimate in a Bloomberg News survey. Slowing inflation damped speculation Chinese authorities would take more steps to curb growth in the world’s third-largest economy.
Dollar Index
“We’re seeing better growth in Asia lifting risk appetite,” said the board,” said Boris Schlossberg, director of currency research at the online currency trader GFT Forex in New York. “True risk seeking is focused on Australian dollar.”
The Aussie advanced 0.9 percent to 79.41 yen and rose 1.1 percent to 88.48 U.S. cents. New Zealand’s currency appreciated 0.5 percent to 62.59 yen and rallied 0.6 percent to 69.72 cents.
The Bloomberg Correlation-Weighted Dollar index rose yesterday after suffering its largest drop since November as traders added to bets the Federal Reserve will raise borrowing costs after Chairman Ben S. Bernanke said the central bank may boost its discount rate “before long.” The index, which calculate weights based on variances in exchange rates, slid 0.1 percent today to 101.8375.
Futures on the Chicago Board of Trade showed a 53 percent chance the Fed will increase its zero to 0.25 percent target lending rate by at least a quarter-percentage point by its September meeting, up from 49 percent odds a week earlier.
U.S. jobless claims fell to 440,000 from a revised 483,000 a week ago, the Labor Department reported today. The median estimate of 47 analysts in a Bloomberg survey was for a decline to 465,000.
To contact the reporters on this story: Ben Levisohn in New York at blevisohn@bloomberg.net; Paul Dobson in London at pdobson2@bloomberg.net
Last Updated: February 11, 2010 11:15 EST
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