Growth Concern Overshadows -- Euro Weakens

Euro Weakens as Growth Concern Overshadows Central-Bank Efforts By John Detrixhe - Oct 13, 2012 9:30 AM GMT+0530 The euro declined against most of its major counterparts as concern that the global economy is slowing overshadowed policy makers’ efforts to contain Europe’s three-year-old debt crisis. The shared currency touched its lowest versus the dollar in almost two weeks as the International Monetary Fund cut its growth forecasts. It also said Greece should get more time to meet fiscal targets. The euro fell after Standard & Poor’s cut Spain’s credit rating, then rose on bets the move will pressure the nation to seek aid, unlocking a stimulus program. European Union leaders meet next week. Singapore’s dollar climbed as its central bank unexpectedly left monetary policy unchanged.  “You had the sentiment around Spain where the S&P downgrade evolved from being a concern to a potential benefit,” Noel Hebert, chief investment officer at Bethlehem, Pennsylvania-based Concannon Wealth Management LLC, which oversees about $250 million, said in a telephone interview. “The IMF news was ugly at first and then better at second as they backed off on austerity demands. If you follow the slope of where the euro went this week, that seems to generalize the path.” The euro depreciated 0.7 percent to $1.2951 this week in New York, halving last week’s 1.4 percent gain. It touched $1.2826, the lowest level since Oct. 1, almost falling below its 200-day moving average of $1.2824. The 17-nation currency fell 0.9 percent to 101.61 yen. The Japanese currency gained 0.3 percent to 78.44 yen per dollar. 

Net Shorts  Futures traders increased their bets that the 17-nation currency will decline against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission show. 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 72,570 on Oct. 9, compared with net shorts of 50,265 a week earlier. The Swedish krona was the biggest loser against the euro as inflation abated more than forecast, raising the possibility of an interest-rate cut before year-end. A Statistics Sweden report showed consumer price growth slowed to an annual 0.4 percent in September, from 0.7 percent the prior month. A Bloomberg survey projected a decline 0.6 percent. The currency fell 0.7 percent to 8.6737 per euro and slid 1.4 percent to 6.6975 to the greenback. The krona will probably decline as European asset prices stabilize and investors unwind their bets on haven currencies including Sweden’s, according to Morgan Stanley. “We would expect the Swedish krona to lead the way with the current round of position-unwinding,” Morgan Stanley said Oct. 11 in a research report. Aussie Strengthens The Australian dollar gained against 14 of its 16 most- traded peers this week amid speculation that China, the nation’s biggest trader partner, will take steps to stimulate flagging economic expansion. The Aussie rose 0.5 percent to $1.0233. China’s economy expanded 7.6 percent in the second quarter from a year earlier, the least in three years. Growth may have slowed to 7.4 percent in the third quarter, according to the median estimate of 27 economists surveyed by Bloomberg. The euro region’s economy will expand 0.4 percent this year, 0.1 percentage point less than forecast in July, and grow 0.2 percent in 2013, versus 0.7 percent predicted three months ago, the Washington-based IMF said in a report. The world economy will grow 3.3 percent this year, the slowest pace since the 2009 recession, compared with a July forecast of 3.5 percent, it said.......http://www.bloomberg.com/news/2012-10-13/euro-weakens-as-growth-concern-overshadows-central-bank-efforts.html