Euro Near 5-Week Low on Concern More European Ratings to Be Cut
Dec. 9 (Bloomberg) -- The euro traded near a five-week lowagainst the dollar on speculation credit ratings of moreEuropean nations will be cut after Greece’s debt ranking waslowered by Fitch Ratings.
The pound was near its weakest level in almost two monthsversus the dollar on concern that Dubai’s state-controlledcompanies will have to sell U.K. assets to pay for loanobligations. The yen reversed earlier gains on speculation theBank of Japan will take more credit-easing measures after areport showed the economy expanded less than initially estimatedin the third quarter.
“There are worries more European countries’ sovereignratings will be downgraded,” said Yuji Saito, head of theforeign-exchange group in Tokyo at Societe Generale SA. “Thereare also concerns that companies in Dubai, which are fallingbehind on debt payments, may need to sell U.K. property. Riskaversion is prevailing, so the dollar will probably be boughtand the euro will likely be sold.”
The euro traded at $1.4700 as of 10:06 a.m. in Tokyo from$1.4704 in New York yesterday, after earlier declining to$1.4668, the weakest level since Nov. 3. It was at 90.46 pencefrom 90.27 pence. The yen bought 130.21 per euro from 130.03,after earlier climbing to 129.66, the strongest since Dec. 1.Japan’s currency was at 88.53 per dollar from 88.43.
The pound declined to $1.6253 from $1.6287 yesterday, afterearlier falling to $1.6226, the lowest level since Oct. 15. TheU.K. currency was at 143.95 yen from 144.03 yen.
Greece’s Rating
Fitch yesterday lowered Greece’s credit rating one step toBBB+, the third-lowest investment grade, and said the outlookfor the rating is negative. Standard & Poor’s on Dec. 7 putGreece’s A- rating on watch for a possible downgrade, andrevised the outlook on Portugal’s rating to negative from stable.
Moody’s Investors Service said yesterday the U.K. and theU.S. have “resilient” Aaa ratings, as opposed to the“resistant” top ratings of Canada, Germany and France. Moody’salso said that its top debt ratings on the U.S. and the U.K. may“test the Aaa boundaries.”
The pound weakened against 15 of 16 most-active currencies.Nakheel PJSC, the Dubai World-owned property developer seekingto renegotiate debt, had a first-half loss of 13.4 billiondirhams ($3.65 billion) as revenue fell and it wrote down thevalue of land and property, according to a document obtained byBloomberg News.
On Nov. 25, the government said it was seeking a“standstill” agreement on Dubai World’s debt.
Japan’s Economy
The yen reversed earlier gains on speculation the BOJ willexpand its credit-easing measures further to support the fragileeconomic recovery.
Japan’s gross domestic product rose at an annual 1.3percent pace in the third quarter, slower than the 4.8 percentreported in preliminary figures last month, the Cabinet Officesaid today in Tokyo. The median estimate of economists surveyedwas for 2.8 percent growth.
“The economic rebound still isn’t that strong,” saidMasanobu Ishikawa, general manager of foreign exchange at TokyoForex & Ueda Harlow Ltd., Japan’s largest currency broker.“Given these worries, the central bank may take more policyaction. This would likely be negative for the yen.”
Japanese Prime Minister Yukio Hatoyama unveiled a 7.2trillion yen ($81 billion) stimulus package yesterday, and theBank of Japan last week decided a 10 trillion yen credit programto revive the economy.
‘Dollar Weakness’
Gains in the U.S. currency were tempered after PacificInvestment Management Co., which manages the world’s biggestbond fund, said “more dollar weakness should be expected,” anddeclines in its value may help redress global economicimbalances and spur growth in the U.S. economy.
A weaker dollar may not lead to a loss of the greenback’sstatus as a global reserve currency and deflation remains alarger threat in the U.S. than inflation, Scott Mather, a Pimcomanaging director, wrote in an article posted on the company’sWeb site.
The Dollar Index, which IntercontinentalExchange Inc. usesto track the dollar against the currencies of six major U.S.trading partners, rose 0.1 percent to 76.258.
To contact the reporters on this story:Ron Harui in Singapore at rharui@bloomberg.net.
Last Updated: December 8, 2009 20:17 ESTSource: Bloomberg
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