Euro within two cents of July 2010 low on crisis, growth concern

June 4 (Bloomberg) -- The euro was within two cents of its weakest level versus the dollar in almost two years on speculation Europe’s leaders will struggle to agree on how to resolve the sovereign debt crisis, harming global growth.

The 17-nation currency earlier slid against the dollar and the yen as pressure built on German Chancellor Angela Merkel to back additional measures such as joint debt issuance in the bloc. Merkel and Finance Minister Wolfgang Schaeuble have urged Spain to accept an international bailout, Der Spiegel magazine reported, without saying where it obtained the information.

“Over the weekend there were a couple of pieces of news that are putting pressure on the euro, like Germany urging Spain to take money,” said Lutz Karpowitz, a senior foreign-exchange strategist at Commerzbank AG in Frankfurt, who forecasts the currency will trade at about $1.20 at the end of the year. Euro bonds “could only ever be a very-long-term solution. It will take years to implement,” he said.

The euro was little changed at $1.2430 at 7:30 a.m. New York time. It fell to as low as $1.2288 on June 1, the weakest level since July 1, 2010. Europe’s shared currency was at 97.08 yen from 97.01 on June 1, when it reached 95.60, the least since November 2000. The dollar also little changed at 78.10 yen.

Spanish Prime Minister Mariano Rajoy said on June 2 that leaders should reinforce efforts to protect euro-area banks and added his voice to calls for a more robust “banking union.” On the same day Merkel toughened her opposition to so-called euro bonds telling members of her party in Berlin that “under no circumstances” would she agree to German-backed shared issuance of the securities.

Unsuitable Measure

Germany views jointly issued bonds in the euro area as an unsuitable measure to overcome the debt crisis at this time, government spokesman Steffen Seibert told reporters today in Berlin.

Futures traders boosted bets to a record high that the euro will depreciate against the dollar, according to data from the Commodity Futures Trading Commission on June 1.

The difference in the number of wagers on a decline in the shared currency compared with those on a gain, known as net shorts, was 203,415 in the five days ended May 29, the most since the euro’s inception in 1999. It was the third record in as many weeks.

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