The euro declined to a two-year low versus the dollar on concern anti-austerity opposition party Syriza will win Greek elections next month, endangering the country’s bailout agreement.

The 18-nation euro fell versus 11 of its 16 major counterparts amid speculation the European Central Bank will introduce more currency-depreciating stimulus next year to revive growth. The yen gained for the first time in three days as Asian stocks retreated, spurring demand for haven assets. China’s yuan fell to a six-month low versus the dollar. Malaysia’s ringgit slid for a second day as oil headed for its biggest annual decline since 2008.

“The euro is going to break $1.20 against the dollar in the first quarter,” said Kazuo Shirai, a trader at MUFG Union Bank NA in Los Angeles. “More than continued improvement in the U.S., it’s a case of Europe and other regions stumbling.”

The euro declined 0.1 percent to $1.2139 at 2:22 p.m. in Tokyo after sliding to $1.2132, the weakest level since July 2012. The shared currency dropped 0.3 percent to 146.23 yen. The yen strengthened 0.2 percent to 120.45 per dollar.

Greek Prime Minister Antonis Samaras yesterday failed in his third and last attempt to persuade parliament to support his Presidential candidate, Stavros Dimas. Samaras is due to meet current President Karolos Papoulias in Athens today to request early elections on Jan. 25. Opinion polls show Syriza led by Alexis Tsipras ahead of Samaras’s New Democracy party.

The ECB next meets on Jan. 22 amid speculation officials are preparing to consider sovereign-bond purchases to drive down borrowing costs and revive inflation.

Euro’s Decline

The euro has weakened 1.9 percent this year, according to Bloomberg Correlation-Weighted Indexes that track 10-developed nation currencies. The dollar gained 13 percent, while the yen weakened 3 percent.

The yen advanced against all it 16 major counterparts today as the MSCI Asia Pacific Index of shares dropped 0.7 percent, extending its annual decline.

China’s yuan fell for a third day before data this week that economists say will show the economy is losing momentum.

The central bank cut interest rates in November for the first time in more than two years to spur growth. An official Purchasing Managers’ Index (CPMINDX) will indicate manufacturing failed to expand for the first time in more than two years, based a Bloomberg News survey before the data on Jan. 1. An industry report tomorrow will confirm the first contraction in factory output since May, according to a separate survey.

Hurt Sentiment

“The rate cut has spurred concerns over China’s economy and has hurt the sentiment on yuan,” said Banny Lam, co-head of research at Agricultural Bank of China International Securities Co. in Hong Kong. “Investors are cautious as economic data still isn’t pointing to any revival.”

The yuan fell 0.07 percent to 6.2264 per dollar after depreciating to 6.2362, the weakest since June 25.

The ringgit declined 0.2 percent to 3.5038 per dollar. it has fallen 6.5 percent this year, the worst performance among emerging Asian currencies.

The slump in crude prices to a five-year low will probably pare economic growth in net oil exporter Malaysia to the lower end of its 5 percent to 6 percent estimate for next year, Abdul Wahid Omar, a minister in the prime minister’s office, said Dec. 17. Oil has tumbled more than 45 percent this year.

The dollar is set to appreciate against all of its 31 major peers in 2014 for the first time in data going back to 1989 as quickening growth gives the Federal Reserve reason to start raising interest rates next year.

“The U.S. economy has been doing so well,” said Joseph Capurso, a currency strategist at Commonwealth Bank of Australia in Sydney. “The market’s been bracing for Fed tightening at some point next year.”

The dollar is poised to strengthen to 130 yen next year, Capurso said, a level last seen in 2002. The U.S. currency will probably strengthen past $1.20 versus the euro if the opposition Syriza party prevails in Greece’s elections and jeopardizes the terms of the country’s financial bailout, he said.

 

Source: Bloomberg – Euro Falls to Two-Year Low Amid Greek Concern as Yuan Weakens

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