Euro falls toward 1-week low amid political turmoil before ECB

The euro fell toward a one-week low versus the dollar as European Central Bank policy makers prepared to meet tomorrow amid political and banking turmoil that threatens to renew the region’s sovereign-debt crisis.

The 17-nation currency slid against most of its 16 major peers as Spain’s premier resisted opposition calls to resign and Italy’s Banca Monte dei Paschi di Siena SpA faces criminal probes over losses it hid in 2008 and 2009 using derivatives. The euro declined as Greece’s finance minister said its strength is a concern. The yen weakened to a 32-month low against the dollar on speculation Japan will select a new central-bank chief committed to boosting monetary easing.

“The euro is reacting to all the political issues coming out of Italy and Spain,” Charles St-Arnaud, a foreign-exchange strategist at Nomura Holdings Inc. in New York, said in a telephone interview. “We’ve seen tensions in the Eurozone decrease meaningfully so far this year, so it’s normal that at some point investors would realize things are better, but still not that good.”

The euro fell 0.5% to $1.3517 at 3:17 p.m. New York time, after declining to $1.3459 yesterday, the lowest since Jan. 29. It slipped 0.8% to 126.16 yen after climbing to 127.71, the strongest since April 2010. The yen rose 0.3% to 93.34 per dollar after depreciating to 94.06, the weakest level since May 2010.

The shared currency may decline as low as $1.3180, its weakest level since Jan. 10, if it fails to break through a key level of resistance at $1.3711 to $1.3727, Cilline Bain, a London-based technical analyst at Credit Suisse, wrote in a client note. It has support at $1.3310, he said.

Koruna, Zloty

The Czech koruna gained 0.7% to the dollar as the central bank kept interest rates at effectively zero for a second meeting. The koruna appreciated for a second day to 18.7475.

Poland’s currency declined as much as 0.9% against the greenback as monetary policy makers at Narodowy Bank Polski cut its main interest rate for a fourth month to avert the biggest economic slowdown in more than a decade. The zloty weakened to 3.0904.

Australia’s dollar declined against all but one of its major peers as retail sales fell 0.2% in December, adding to signs the Reserve Bank may cut interest rates next month. The Aussie slid 0.7% to $1.0319, after dropping to $1.0297, the lowest since Nov. 16. It dropped 0.9% to 96.38 yen.

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