Euro Tumbles on Speculation of 'Imminent' Downgrades From S&P
Jan. 13 (Bloomberg) -- The euro dropped, reaching a 16- month low versus the greenback, amid speculation Standard & Poor's may downgrade the credit ratings of some countries in the 17-nation currency region as soon as today.
The shared currency slid against most of its 16 major counterparts tracked by Bloomberg, erasing weekly gains versus the dollar and yen. Philippa Melaniphy, a spokeswoman at S&P, declined to comment. The Dollar Index climbed to a 16-month high as U.S. stocks fell after JPMorgan Chase & Co. reported profit declined.
"Coming into the weekend, people are going to be concerned that in the absence of the ability to trade, they are going to be stuck with something from Europe," said Thomas Molloy, chief dealer at FX Solutions, an online currency-trading company in Saddle River, New Jersey. "There is market chatter about these headlines from Dow Jones about potential downgrades, but it's sounding more like opinion and chatter than a quote from anyone major."
The euro slid 1.3 percent to $1.2650 at 10:34 a.m. in New York. It touched $1.2624, the lowest level since Aug. 25, 2010, and was headed for a 0.5 percent weekly decline. The shared currency sank 1 percent to 97.39 yen and touched 97.20 yen, the weakest level since December 2000. The Japanese currency declined 0.3 percent to 76.98 per dollar.
France's Rating
France will lose its AAA credit rating from S&P, Agence France-Presse reported, citing an unidentified government official. Germany's credit rating will not be cut, Reuters reported, citing a senior euro-region source. Dow Jones Newswires reported several European nations may face "imminent" downgrade. It cited European Union sources.
The euro retreated 0.6 percent today against nine-developed nation peers tracked by Bloomberg Correlation-Weighted Currency Indexes after Italian borrowing costs declined less at a note sale than when the country auctioned bills yesterday. The dollar gained 0.9 percent, while the Swedish krona was the biggest loser with a decline of 0.6 percent.
Italy sold notes due in November 2014 at an average yield of 4.83 percent, down from 5.62 percent at a prior auction on Dec. 29. Investors bid for 1.2 times the amount allotted, down from a bid-to-cover ratio of 1.36 last month.
The nation's cost of borrowing for one year plunged to 2.735 percent at a bill sale yesterday, from 5.952 percent yield at the prior auction on Dec. 12.
'Room for Disappointment'
"The fact that the bid-to-cover ratio was not especially high, combined with euphoric reactions to the bill auctions yesterday, left room for disappointment," said Shahab Jalinoos, a senior currency strategist at UBS AG in Stamford, Connecticut.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, reached 81.784, the highest level since Sept. 15, 2010, as JPMorgan's profit report bolstered the dollar's refuge appeal. The Standard & Poor's 500 Index slid 1.1 percent.
JPMorgan, the largest U.S. bank by assets, said fourth- quarter profit decreased 23 percent as trading revenue and investment-banking fees declined.
The euro remained lower even after a gauge of consumer confidence in the U.S. rose more than forecast. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment increased to 74 from 69.9 at the end of December. The median estimate in a Bloomberg News survey called for 71.5.
South Korea's won was the biggest winner against the dollar among major currencies. It rose to a one-week high as the central bank kept borrowing costs unchanged for a seventh month to support the economy and global funds boosted holdings of Korean stocks for a fourth day.
The won strengthened the most in more than three weeks, rising 0.9 percent to 1,148.40 per dollar and reached 1,147.68 earlier, the strongest level since Jan. 5.
To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/Sent from my iPad
