The euro was 0.7 percent from an 11-month low versus the dollar before France and Spain sell bills this week amid concern the currency bloc’s second- and fourth-largest economies will have their credit rating cuts.
The 17-nation euro traded near a two-month low versus the yen after Fitch Ratings lowered its outlook for France’s credit ranking and said it may cut Spain’s grade. The dollar advanced against the pound for the first time in three days ahead of housing and consumer spending data this week forecast to show the U.S. economy is gaining momentum, reducing the case for the Federal Reserve to conduct more monetary easing.
“The main focus is France and the pretty decent expectation that they will lose the AAA rating, and that would still hurt the euro,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney, Australia’s second-largest lender. “The U.S. dollar is appealing to us at the moment because it works as a safe haven, but also it is a positive when their data is improving because it keeps QE3 at bay, which is important.”
The euro dipped 0.1 percent to $1.3033 as of 8:28 a.m. Monday in Tokyo from the close in New York on Friday after falling to $1.2946 on Dec. 14, the least since Jan. 11. The common currency was little changed at 101.42 yen after touching 101.05 on Dec. 15, the lowest since Oct. 4. The dollar climbed 0.1 percent to $1.5523 per pound and rose 0.1 percent to 77.81 yen.
France is scheduled to sell as much as 7 billion euros ($9.1 billion) of bills Monday. Spain will auction government securities Tuesday maturing in three and six months.
Fitch reduced its outlook for France’s credit rating to negative from stable on Friday, saying the country is more exposed to the region’s debt crisis than other top-rated eurozone countries because of its budget deficit and government debt burden. The ratings company separately placed other European nations, including Spain and Italy, on a review for a downgrade.
Futures traders increased their bets to a record level that the euro will decline against the U.S. dollar. The difference in the number of wagers by hedge funds and other speculators on a drop in the euro compared with those on a gain was 116,457 on Dec. 13, compared with so-called net shorts of 95,814 a week earlier, according to figures from the Washington-based Commodity Futures Trading Commission.
The euro has depreciated 0.8 percent this year against nine developed-nation counterparts, according to Bloomberg Correlation-Weighted Indexes. The yen has advanced 4.8 percent and the dollar has gained 1.7 percent.
Housing starts in the U.S. increased 1.1 percent last month from October when they declined 0.3 percent, according to economist estimates before the Commerce Department releases the data Tuesday. Consumer spending rose for a fifth month in November, adding 0.3 percent, another survey of economists showed before the government report due Dec. 23.
“The U.S. dollar is benefiting from the improvement in the underlying economic data,” Emma Lawson, a currency strategist at National Australia Bank Ltd. in Sydney, wrote in a note Monday. “On a cyclical economic basis, this is no longer a pure ugly contest; there are some real signs of improvement in the U.S. economy.”
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