Euro falls most in 2 months on growth concern; yen, dollar gain

Bond Spreads

The extra yield investors receive for purchasing a U.S. 10- year security versus a similar maturity Japanese bond fell to 94 basis points, the lowest in a week.

The euro weakened against most of its 16 major peers even after Spain’s borrowing costs fell at a 4.8 billion-euro auction of three- and 10-year debt, the biggest since January. The sale came amid expectations the nation will ask the European Central Bank to buy its debt.

“One of the big problems that remains unresolved in the euro area is a lack of growth,” said Lee Hardman, a foreign- exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “We still anticipate the euro will continue to weaken and expect a move back to $1.20 over the next six to 12 months.”

The euro has risen 2.8 percent in the past month, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar fell 2.5 percent and the yen weakened 0.8 percent. It rallied 1.7 percent since Sept. 6 when the European Central Bank pledged unlimited bond purchases to regain control of interest rates.

High Yielders

Nomura Holdings Inc. increased its euro-dollar forecast to $1.28 from $1.18 for the third quarter of this year, according to a note to clients yesterday. The Tokyo-based bank expects the shared currency to trade at $1.28 at year-end compared to a previous estimate of $1.15.

Australia’s currency fell as the Chinese data clouded the prospects for the South Pacific nation’s resource exports.

“The market was probably expecting a bit more of a bounce” in the Chinese data, said Emma Lawson, a currency strategist at National Australia Bank Ltd. in Sydney. “The Aussie is a little bit lower. There’s just a little bit of disappointment there.”

The so-called Aussie dropped 0.9 percent to $1.0390. South Africa’s rand declined 1.2 percent to 8.3689 per dollar.

Bloomberg News

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