The euro weakened against most major currencies amid concern that the European Central Bank’s pledge to buy the bonds of troubled member nations won’t be enough to revolve the region’s debt crisis.
The yen erased losses after reaching a four-week low versus the dollar as the Bank of Japan unexpectedly expanded monetary stimulus by 10 trillion yen ($127 billion), joining the Federal Reserve and European Central Bank in taking steps to spur economic growth. The 17-nation euro fell for a third day against the dollar before a report tomorrow that may show services and manufacturing in the region shrank for an eighth month. South Africa’s rand tumbled even after platinum miners agreed to return to work following a six-week strike.
“People are skeptical that there is going to be enough money in the bailout fund, of the ECB’s willingness to take assets on its balance sheet and that economic growth can be created,” said Greg Anderson, the North American head of Group of 10 currency strategy at Citigroup Inc. in New York. “People were very skeptical and wanted to sell the euro when it was rising from $1.25 but you couldn’t touch it. Now it has crested and it’s a good time to re-establish shorts.”
The euro declined 0.2 percent to $1.3021 at 9:19 a.m. in New York. The shared currency fell 0.4 percent to 102.38 yen and the Japanese currency was 0.2 percent stronger versus the dollar at 78.63 yen after depreciating to 79.22, the weakest level since Aug. 22.
Euro Retracement
The euro’s 14-day relative strength index versus the dollar fell below the 70 level for the first time in six days, the longest streak since May 2011. The 70 level indicates an asset may be “overbought,” having risen too far, too quickly and is due for a correction.
Goldman Sachs Group Inc. ended a trade recommendation to buy the euro against the dollar.
“With much of the expected developments now past us, our initial target of $1.30 reached and a period of further consolidation possible, we consider it prudent to close our recommendation for a potential gain of about 7 percent,” Goldman Sachs foreign-exchange analysts led by London-based Thomas Stolper wrote today in an e-mailed report.
The yen has appreciated 6.1 percent during the past six months, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar dropped 0.5 percent and the euro fell 2.3 percent.
Central Bank
The Japanese central bank’s decision to enlarge its asset-purchase fund to 55 billion yen was forecast by five of 21 economists surveyed by Bloomberg News. The bank kept its benchmark interest rate between zero and 0.1 percent.
Finance Minister Jun Azumi said the stimulus was bolder than expected and “very much welcomed” by the government, after calls from some lawmakers for the BOJ to do more to spur growth and counter entrenched deflation.
The impact from the central bank’s actions were limited by the rising tensions between the nation and China, Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto wrote to clients.
South Africa’s rand fell against all 16-major counterparts as violence continued at platinum mines even after an illegal strike ended at Lonmin Plc’s Marikana site.
The rand sank 0.7 percent to 8.2366 per dollar.
Australia’s dollar may extend its slide from a six-month high set last week as sentiment toward the currency remains “fragile,” according to Oversea-Chinese Banking Corp.
A decline below its 55-day moving average of $1.0396 may send the currency toward the 200-day moving average at $1.0331, according to Singapore-based analysts led by Selena Ling.
The so-called Aussie fell 0.1 percent to $1.0451 after rising to $1.0625 on Sept. 14, the strongest since March 20.
