Europe’s currency was also close to a three-month low versus the dollar after a slide in Portugal’s government bonds last week dimmed the outlook for debt auctions over the next three days in the nation, Spain and Italy. Australia’s dollar erased gains after China reported a trade surplus that was less than economists forecast. South Korea’s won traded near the strongest in eight weeks after central bank data showed producer price inflation accelerated to a two-year high.
“It looks as though the market is pricing in some further deterioration in the sovereign debt story,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “Obviously the Portugal auction on Wednesday will be closely watched. I see euro weakness continuing.”
The euro traded at 107.19 yen as of 12:58 p.m. in Tokyo from 107.32 yen in New York on Jan. 7, when it touched 106.95 yen, the lowest level since Sept. 14. It was at $1.2901 from $1.2907, after earlier reaching $1.2867, the weakest since Sept. 14. The yen fetched 83.08 per dollar from 83.15. Financial markets in Japan are closed today for a public holiday.
Portugal will sell 2014 and 2020 bonds on Jan. 12. Italy will offer 2014 bonds and Spain will auction 2016 debt on Jan. 13, according to data compiled by Bloomberg. The yield on Portuguese 10-year bonds climbed to as high as 7.19 percent on Jan. 7, the most since Nov. 11. The yield on Spain’s 10-year bonds reached 5.54 percent last week, the highest since Dec. 21.
UBS AG, the world’s second-largest foreign-exchange trader, recommended today that investors sell the euro at $1.2900, with a target of $1.2450 and a stop-loss order at $1.3150.
“The markets are likely to increasingly worry about Portugal’s upcoming bond auction on Wednesday and Spain’s on Thursday,” Gareth Berry, a Singapore-based currency strategist at UBS, wrote in a note today.
Germany and France will pressure Portugal to seek aid from the European bailout fund soon to prevent contagion to other countries such as Spain and Belgium, Der Spiegel reported on Jan. 8, without saying where it got the information.
“Experts” in the French and German governments believe the southern European country won’t be able to raise money on capital markets for much longer, the German magazine said in a preview of a report to be published in its next edition. A German Finance Ministry spokesman said yesterday his nation isn’t pressing Portugal to tap the rescue fund.
Gains in Australia’s dollar were curbed after China’s customs bureau said today the Asian nation’s trade surplus was $13.1 billion in December, less than the $20.8 billion median estimate of 20 economists surveyed by Bloomberg News. China is Australia’s largest trading partner and New Zealand’s second- biggest export market.
South Korea’s Won
South Korea’s won strengthened after the Bank of Korea said today producer prices rose 5.3 percent last month from a year earlier, the biggest gain since December 2008, spurring speculation policy makers will raise interest rates this week.
“There are market forces betting on a stronger won as we see inflation rise,” said Kim Jin Ju, a currency trader at Korea Exchange Bank in Seoul.
To contact the reporters on this story: Ron Harui in Singapore at rharui@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
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