Euro falls below $1.30 as economic weakness may spur ECB moves

Monthly Results

The euro slid against all but two of its 16 major peers last month, losing 4% against the greenback and 3% against the yen. The dollar rose 0.9% versus the yen, a fifth monthly gain, the longest winning streak since August 2008.

The yen, pound and euro “reflect weak economies,” Pacific Investment Management Co.’s Bill Gross said today in a Twitter message. Newport Beach, California-based Pimco is manager of the world’s biggest bond fund.

“Be leery of horsemeat & currency mispricings,” he wrote. “Buy Mex peso, Brazil real.”

Brazil’s real gained 0.7% to the greenback and South Korea’s currency was up 0.5% in February, the biggest gainers of the dollar’s 16 most-traded peers, according to data compiled by Bloomberg. The pound lost 4.4%, the biggest decline, while Norway’s krone weakened 4.8%.

This year, the real has strengthened 3.6% as the pound has lost 7.5%. Mexico’s peso has gained 0.7% to the dollar.

Zloty Gains

The zloty hit a six-week high against the euro after Poland’s fourth-quarter economic growth rose more than expected, curbing the need for further interest rate cuts.

The Polish currency strengthened 0.4% to 4.1330 per euro.

A gauge of manufacturing in the 17-nation euro area was 47.9 in February, London-based Markit Economics said, below the level of 50 that shows contraction. Unemployment in the region climbed to 11.9% in January, the highest since the data series started in 1995, the European Union statistics office said.

“The overall picture is consistent with a euro-zone economy that is still stuck in recession,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “There are downside risks for the euro. The ECB could signal it is closer to further monetary easing next week.”

The pound fell to the lowest level since July 2010 against the dollar as Markit Economics said its manufacturing gauge based on a survey of purchasing managers slid to 47.9, missing analyst estimates for a reading of 51.

Economic Reading

“The data was supposed to be good and it came out negative so that has taken the rug out from under sterling’s feet,” said Jane Foley, a senior foreign-exchange strategist at Rabobank International in London. “There is an array of negative fundamentals for the U.K., so it’s very difficult to see silver linings. I think sterling will be weak all year.”

The pound slid 0.9% to $1.5033 after dropping to the lowest level since July 2010. Sterling weakened 0.7% to 86.69 pence per euro.

The euro is forecast to be about unchanged at $1.30 by the end of the year, while the yen is estimated to weaken to 95 to the greenback, according to the median estimate of economists surveyed by Bloomberg.

Bloomberg News

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