The euro touched the lowest level against the dollar in more than a month after the European Central Bank said financial institutions will repay less of its three-year loans next week than economists forecast.
The 17-nation currency trimmed gains versus the yen as the ECB said 356 banks will hand back 61.1 billion euros ($80.5 billion) on Feb. 27, the first opportunity for early repayment of the second Longer-Term Refinancing Operation. The median forecast of economists in a Bloomberg News survey was for 122.5 billion euros. The Australian dollar rose the most in seven weeks versus the U.S. currency after central bank Governor Glenn Stevens said the bar for intervention was high.
“The LTRO announcement is lower than expectations, and the euro has taken a bit of a hit on that,” said Bilal Hafeez, global head of foreign-exchange strategy at Deutsche Bank AG in London. “This could imply banks aren’t finding so much demand for credit in the euro area, which will weigh on the European growth picture. The ECB is unlikely to tighten policy this year, which weighs on the euro.”
The euro was little changed at $1.3188 at 8:22 a.m. in New York and touched $1.3157, the lowest level since Jan. 10. The common currency gained 0.1 percent to 122.99 yen after strengthening as much as 0.8 percent. The yen weakened 0.2 percent to 93.27 per dollar.
The common currency also declined after the European Commission forecast the region’s economy will shrink for a second year in 2013. Gross domestic product will contract 0.3 percent in 2012, compared with a November prediction of 0.1 percent growth, the Brussels-based commission said.
The euro rose earlier after an index of German business confidence improved more in February than economists forecast.
The Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, climbed to 107.4 from 104.3 in January. That’s the fourth straight gain. Economists predicted an increase to 104.9, according to the median of 38 forecasts in a Bloomberg News survey.
“Given the more positive sentiment over the past couple of months in financial markets, the stronger German Ifo today is perhaps not that surprising,” said Kiran Kowshik, a foreign- exchange strategist at BNP Paribas SA in London. “We established a buy-euro recommendation yesterday.”