The euro traded at the lowest level against the dollar in almost three months as Italy moved toward more elections and before data forecast to show the region’s economy shrank in the fourth quarter of 2012.
The yen rose against most of its 16 major peers as China’s CSI 300 Index of equities dropped by the most in two years, boosting demand for haven assets. Australia’s dollar sank to an almost eight-month low against its U.S. equivalent after building approvals declined. The Dollar Index traded at almost its highest level since August. Italy, Germany and France will report monthly purchasing manager index figures tomorrow.
“Europe is being mainly driven by all the news we have on the policy and economic side,” Charles St-Arnaud, a foreign- exchange strategist at Nomura Holdings Inc. in New York, said in a telephone interview. “The end game following the Italian election isn’t exactly clear-cut yet. Most economies in Europe are expecting a slight downgrade in PMI tomorrow, which is weighing on the euro.”
The euro fell 0.1% to $1.3010 at 8:50 a.m. New York time, after touching $1.2967 on March 1, the lowest level since Dec. 11. The yen gained 0.2% to 121.67 per euro and was up 0.1% to 93.53 per dollar.
The Norwegian krone strengthened the most in a week amid speculation the currency’s plunge to a seven-month low was overdone. It appreciated 0.6%, the most since Feb. 25, to 5.7189 per dollar before trading up 0.5% to 5.7241.
South Korea’s won fell the most in a month as slowing services and manufacturing growth in China damped the country’s export outlook. The currency declined 0.8%, the most since Feb. 8, to 1,093.55 per dollar before trading at 1,093.24.
The Australian dollar fell after an unexpected drop in home-building approvals in January added to speculation the Reserve Bank will cut interest rates this year. The so-called Aussie slid 0.5% to $1.0148, after falling to $1.0115, the weakest level since July 12.
The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against currencies of six U.S. trading partners, was little changed at 82.307. It reached 82.509 on Feb. 1, its highest level since Aug. 20.
European Central Bank policy makers, led by President Mario Draghi, will meet on March 7.
Futures traders are betting the euro will drop against the dollar for the first time in seven weeks. Figures from the Washington-based Commodity Futures Trading Commission showed the difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain, so-called net shorts, was 9,394 contracts in the week ended Feb. 26. The week before, large speculators held a net- long position of 19,103 contracts.
“People are rationalizing where they want to be positioned throughout the mass of event risk this week and probably the way to play it is with a long-dollar bias,” Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “The ECB’s language will be monitored very closely.”
The euro weakened last week after Italy’s electorate revolted against outgoing Prime Minister Mario Monti’s austerity measures, handing the party of comedian-turned-politician Beppe Grillo more than 25% of the vote with its anti-spending cut message and a call for a referendum on euro membership.
Italy’s Democratic Party leader Pier Luigi Bersani, whose coalition won the most votes in Italy’s inconclusive elections last month, said yesterday on state-owned RAI3 television that he would seek to form a government on his own rather than forming an alliance with his main rivals. Stefano Fassina, Bersani’s economic-policy spokesman, said yesterday on Sky TG24 that Italy may hold new elections within months if Bersani fails to win support in parliament.
The 17-nation currency extended declines today after a report from Sentix research institute showed a measure of investor-confidence for the euro region fell more than expected this month.
The euro area’s gross domestic product fell 0.6 percent in the fourth quarter from the previous three-month period, according to the median estimate of 37 economists surveyed by Bloomberg News before the data on March 6.
“What Europe is faced with is growth numbers that aren’t attractive, unemployment that’s getting worse and the Italian situation which remains unclear,” said Alex Sinton, director of institutional foreign exchange at Australia & New Zealand Banking Group Ltd. in Auckland. “The market really hasn’t got many reasons to turn the weakness in euro around.”
The euro needs to weaken to between $1.10 and $1.15 to give “oxygen” to the European economy, French Industry Minister Arnaud Montebourg said in a Europe 1 radio interview broadcast yesterday.
The shared currency has fallen 1 percent in the past month, the third-worst performer among 10 developed market currencies measured by Bloomberg Correlation-Weighted Indexes, after the pound and the Norwegian krone. Norway’s currency climbed at least 0.4 percent against all of its 16 major peers today. The dollar gained 3.3% in the past month, the best performer in the Bloomberg indexes.