The EUR fell from a two-week high against the USD on speculation the ECB will delay withdrawing stimulus measures today as Greece’s struggle to reduce its budget deficit hampers the region’s recovery. The EUR snapped a two-day advance against the JPY after German Chancellor Angela Merkel said a meeting tomorrow with Greek Prime Minister George Papandreou won’t be “about aid commitments.” The JPY rose versus higher-yielding ccys as stocks fell amid concern Chinese lending will slow.
The EUR dropped to $1.3650 as of 5am in NYC from $1.3697 yesterday, when it climbed to $1.3736, the strongest since Feb. 17. The 16-nation ccy slipped to 120.82 JPY from 121.17. USDJPY was little changed at 88.50, after earlier rising to 88.14, the highest level since Dec. 10. All 52 economists surveyed by Bloomberg forecast the ECB will keep the benchmark rate at a record-low 1% at its policy meeting today.
The ECB hasn’t yet said when it will stop unrestricted offerings of seven-day, one-month and three-month funds. ECB President Jean-Claude Trichet will provide an update on the strategy at a briefing at 2:30 p.m. in Frankfurt. The EUR slumped 8% in the past three months against the USD amid concern that nations including Greece may struggle to manage their budget shortfalls. Under pressure to convince investors that the southern European nation can control costs, Papandreou outlined a program yesterday to save 4.8 billion EURs ($6.6 billion) and said after those measures it’s now “Europe’s turn.” The government started selling 10-year bonds in EURs today. While Germany’s Merkel faces domestic opposition to tapping taxpayers to extend a financial lifeline to Greece, protesters in Athens today seized the finance ministry building and blocked roads.
The GBP fell against the USD before a central- bank meeting where economists unanimously say policy makers will keep the main interest rate at a record low. The BoE will leave the main interest rate unchanged at 0.5%, according to all 60 economists in a Bloomberg survey. In a separate poll, all 45 economists predict the central bank will keep its 200 billion pound ($301 billion) bond-buying program on hold. The pound fell 0.2% to $1.5066. The GBP was little changed at 90.61 pence per EUR.
The Shanghai Composite Index dropped 73.63, or 2.4%, to 3,023.37 at the close, the biggest decline since Jan. 26 as Industrial Bank Co., part-owned by a unit of HSBC Holdings Plc, predicted growth in the bank’s new lending will almost halve this year. The MSCI Asia Pacific Index dropped 0.7%.
The JPY strengthened against the AUD and NZD on speculation Japanese companies will bring home overseas earnings before the fiscal year ends this month, while slowing growth in Europe damped demand for the higher-yielding ccys. Large Japanese manufacturers expect the JPY to average 91.16 per USD in the six months to March 2010, according to the BoJ’s quarterly Tankan survey.
