April 22 – The euro fell for a sixth straight day against the dollar after data showing Greece’s budget shortfall last year was worse than forecast raised the prospect that the nation will be forced to activate a rescue plan.
The single European currency weakened against 14 of its 16 most-traded peers as statistics from the European Union showed Greece’s deficit was 13.6 percent last year, higher than the government’s April forecast of 12.9 percent. Ireland overtook the southern European nation as the EU member with the largest deficit, at 14.3 percent. The yen advanced on speculation U.S. President Barack Obama will call for new financial regulations, boosting demand for Japan’s currency as a refuge.
“It really looks like we are coming very close to the point where Greece asks for aid and triggers the EU bailout, and the euro is suffering,” said Lutz Karpowitz, a currency strategist at Commerzbank AG in Frankfurt. “The figures show it’s even worse than expected and not even the worst in the euro zone. The consolidation process will be even harder and this is the reason behind euro weakness.”
The euro dropped 0.4 percent to $1.3336 at 6:45 a.m. in New York from $1.3390 yesterday and traded at 124.35 yen from 124.77 yen. The Japanese currency was at 93.10 per dollar from 93.19 yesterday.
Europe’s single currency has weakened 6.8 percent against the dollar this year amid concern Greece’s difficulty in containing its budget deficit will spread concern about public finances across the region.
‘Troubled Times’
Goldman Sachs Group Inc.’s chief European economist, Erik F. Nielsen, said Greek Prime Minister George Papandreou’s government is likely to cut or delay payments to bond investors even as the country negotiates the terms of a rescue package. The nation’s 10-year bonds fell for an eighth day.
“Greek bond and credit-default swaps spreads remain elevated, and those of Portugal are rising in sympathy,” Gareth Berry, a currency strategist at UBS AG in Singapore, said today in a research note. “Given the apparent lack of urgency in finalizing the details of the bailout plan, we see troubled times ahead for the euro.”
The yen rose against the dollar before Obama speaks today at New York’s Cooper Union, where he will take aim at “risky decisions” made on Wall Street, according to his spokesman.
“Financial reform is something that is born out of an economic collapse that started on Wall Street and spread to Main Street America,” White House press secretary Robert Gibbs said, previewing the president’s address.
Obama’s Speech
“The markets are wary over what Obama may say about new financial-industry regulations,” said Yuji Saito, director of the foreign-exchange department at Credit Agricole Corporate and Investment Bank in Tokyo. “The mood is leaning toward risk aversion. The bias is for the yen to be bought.”
Obama is giving the address as he and Democratic leaders push to get legislation on financial markets through Congress by next month. The Senate Agriculture Committee yesterday approved derivatives legislation requiring U.S. lenders such as JPMorgan Chase & Co. and Bank of America Corp. to spin off their swaps trading desks.
The Securities and Exchange Commission last week filed a lawsuit against Goldman Sachs Group Inc. for fraud linked to its derivatives trading.
Group of Seven finance ministers are meeting today in Washington where they will discuss currencies, financial markets and the timing of removing fiscal stimulus, a U.S. Treasury Department official said on April 20.
Kiwi Strengthens
The yen tends to strengthen during economic and financial turmoil because Japan’s trade surplus makes it less reliant on foreign capital.
The New Zealand dollar strengthened after Finance Minister Bill English said the economy is recovering “slightly more strongly” than a December Treasury forecast, boosting prospects its central bank will increase interest rates from a record low.
By Paul Dobson
Tags: economic recovery, economy, european commission, european union, financial, hard money, investors, US Economy
