Euro at decade low against Yen on European debt concern
The euro fell toward its weakest level in a decade against the yen on speculation Greece is nearing default and as Italy’s borrowing costs rose at a sale of 3.9 billion euros ($5.3 billion) of bonds.
The 17-nation currency fluctuated against the dollar after a statement by a spokesman for French President Nicolas Sarkozy that he and German Chancellor Angela Merkel won’t announce joint initiatives on the region’s debt crisis today. The yen rose against all of its 16 major counterparts except for South Africa’s rand as increased concern in the euro area spurred safety demand. The rand rose as commodity prices rallied.
“The main driver of market stress is euro-zone problems,” said Mark McCormick, a currency strategist at Brown Brothers Harriman & Co. in New York. “There’s a lot of rumors. Markets are riddled with uncertainty and it’s making for very high volatility.”
The euro weakened 0.4 percent to 105.19 yen at 11:37 a.m. in New York, after sliding to 103.90 yesterday, the lowest since June 2001. The shared currency was little changed at $1.3675. The yen rose 0.4 percent to 76.93 per dollar.
The euro has dropped 4.2 percent against the dollar this month and touched $1.3495 yesterday, the lowest level since February. The currency’s 14-day relative strength index against the dollar fell to 29.5, less than 30, signaling it may have declined too fast and may reverse.
The yen strengthened as risk aversion prompted investors to buy the currency as a refuge. It has appreciated 2.9 percent in the past week, the best performer among 10 developed-nation peers tracked by Bloomberg Correlation-Weighted Currency Indexes.
The yen tends to appreciate during economic and financial turmoil because Japan’s current-account surplus makes the nation less reliant on foreign capital.