The euro fell for a third week as measures of manufacturing and business confidence in the region signaled uneven economic growth, bolstering bets on further European Central Bank stimulus in June.
Australia’s dollar dropped the most versus the U.S. currency since January as the nation’s central bank meeting minutes signaled it was likely to maintain record-low interest rates. The 18-nation shared currency reached a three-month low on concern euro-skeptic parties will gain ground this weekend in elections for the European Parliament. The dollar gained before a government report on May 29 that is forecast to show harsh winter weather led the economy to contract in the first quarter, the first three-month downturn since the same period in 2011.
“The driver here, and for most currencies, is monetary-policy expectations,” Eric Viloria, a strategist at Wells Fargo & Co. in New York, said in a phone interview. “The data we had this week, there were some mixed PMIs and the German Ifo was disappointing, and that just serves to reinforce these expectations that there could be monetary easing from the ECB.”
The euro fell 0.5 percent to $1.3629 this week in New York, after reaching $1.3616 yesterday, the weakest since Feb. 13. Europe’s shared currency was little changed at 138.97 yen after declining to 138.15 on May 21, the least since Feb. 6. The dollar gained 0.5 percent to 101.97 yen.
Winners, Losers
The Brazilian real’s 6.2 percent gain is the largest versus the dollar this year, followed by the New Zealand dollar’s 4.1 percent increase, according to data compiled by Bloomberg. The biggest losers have been the Swedish krona, down 3.1 percent, and the Canadian dollar, off 2.2 percent.
Hedge-fund managers and other large speculators added to bets the euro will weaken against the dollar. The difference in the number of wagers on a decline in the common currency, compared with those on a rise -- so-called net shorts -- was 9,220 on May 20, compared with 2,175 a week earlier, according to data from the Commodity Futures Trading Commission.
Schools in Thailand were shut and international television channels were off air as stations broadcast military logos and periodic army statements, after nation’s military seized control this week following a six-month political stalemate that has sapped economic growth.
The baht fell 0.3 percent this week to 32.608 per dollar, after last week’s 0.4 percent rally.
Thailand Coup
The currency “has been fairly stable after the coup, but we caution against jumping in the market at this moment,” Frances Cheung, head of Asian rates strategy at Credit Agricole SA in Hong Kong, wrote yesterday in a report.
The Reserve Bank of Australia predicted spare capacity in labor markets will endure and iron ore, the nation’s biggest export earner, dropped below $100 a ton.
“The outlook for the Aussie is shifting fundamentally with the tighter fiscal outlook, more dovish RBA expectations, Australian commodity price weakening,” Vassili Serebriakov, a New York-based foreign-exchange strategist at BNP Paribas SA, said by phone. “We’ve seen a sizable rally in the Aussie, some buildup in long positions in recent months and that’s starting to unwind a little bit.”
Australia’s dollar fell 1.4 percent to 92.31 U.S. cents and touched 92.09 cents, the lowest level since May 2.
Euro Economy
The Ifo institute’s gauge of German business confidence fell, adding to signs that may prompt the ECB to boost stimulus as soon as next month.
Markit Economics said May 22 that its Purchasing Managers Index of services activity in the euro region rose to the highest in almost three years, even as a factory gauge declined. A French index of factory activity dropped to 49.3 from 51.2 in April, while a services gauge fell to 49.2 from 50.4, Markit Economics said.
ECB President Mario Draghi said May 8 that officials are ready to ease monetary policy in June, citing the euro’s strength as “cause for serious concern.” Policy makers meet on June 5.
“More easing will weaken the single currency,” Mansoor Mohi-Uddin, head of foreign-exchange strategy in Singapore at UBS AG, wrote yesterday in a report. “But the euro’s underlying direction has already turned down as changes in the Federal Reserve’s balance sheet relative to the ECB’s favor the dollar.”
UBS forecasts the euro dropping to $1.25 by the end of year.
Weekend Voting
Balloting for European Union parliament elections will run through May 25. PollWatch 2014, a non-partisan forecasting group, said support for mainstream parties will ebb to 65 percent from 72 percent in final pre-election projections on May 20.
U.K. Prime Minister David Cameron’s Conservative Party lost more than 110 local council seats in local elections as voters increasingly backed the U.K. Independence Party, which had gained a little over 90 seats in early results. Greek opposition party Syriza, which rejects the fiscal-austerity terms that came with the nation’s bailouts, is the front-runner in voting for the region’s lawmakers.
The euro fell 1.3 percent in the past month versus a basket of nine other developed-nation peers tracked by Bloomberg Correlation-Weighted Indexes, the worst performer together with Switzerland’s franc. The yen climbed 0.9 percent and the dollar gained 0.2 percent.
The U.S. economy shrank 0.5 percent in the first three months of 2014 at an annual rate, according to the median forecast of 47 economists in a Bloomberg survey. The commerce department previously said GDP expanded 0.1 percent in that period.
The economy grew at a 3.5 percent in the second quarter, according to the median estimate in a Bloomberg News survey of economists.
The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 major currencies, added 0.3 percent to 1,011.47, reaching the high level since April 24.
To contact the reporter on this story: John Detrixhe in New York at jdetrixhe1@bloomberg.net
To contact the editors responsible for this story: Dave Liedtka at dliedtka@bloomberg.net Paul Cox, Greg Storey
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