The euro weakened for an eighth day against the dollar as Greekpoliticians struggled to form a new government, fueling concern thenation will leave Europe's currency union.

The 17-nation currency extended its run of losses to the longestsince September 2008 as Spain's 10-year bond yields climbed backabove 6 percent. The pound fell for a second day against the dollaras a report showed U.K. retail sales fell the most in more than ayear. The dollar and yen rose against most of their majorcounterparts on increased demand for haven assets. Canada's dollardropped to a three-month low as oil declined for a sixth day.

“It's a function of the uncertainty in Greece and the creditstress in Spain,” said Boris Schlossberg, director of research atonline currency trader GFT Forex in New York. “It appears to beabsolutely clear that the Greeks are not going to do any moreausterity. If the Spanish yield goes to 7 percent, it's going to begetting into the red zone — a warning zone for the euro.”

The euro fell 0.5 percent to $1.2941 at 9:09 a.m. New York time,having dropped 2.4 percent since April 27. The shared currencyweakened 0.9 percent to 102.99 yen after touching 102.89, thelowest since Feb. 16. The yen gained 0.4 percent to 79.56 perdollar.

The MSCI World Index of equities fell 0.6 percent and crude oillost 1.2 percent to $95.83 a barrel.

The Canadian dollar fell to C$1.0063, the lowest level sinceJan. 30, before trading down 0.6 percent at C$1.0050. Oil isCanada's largest export.

Alexis Tsipras, whose Syriza party placed second in the Greekelections on May 6, said he would forge ahead with plans to form acoalition government of left-wing parties after he was handed themandate by President Karolos Papoulias. Syriza is opposed toGreece's European Union-led financial bailout.

Antonis Samaras of New Democracy and Evangelos Venizelos, ofPasok, rejected the ultimatum from Tsipras to send a letter to theEuropean Union revoking their written pledges to implementausterity measures by the time he meets them today. Anotherelection may be held in June if politicians fail to form agoverning coalition.

Greece may “again be the focal point of a new round of riskaversion and this would certainly be something that would not begood for the euro,” said Ulrich Leuchtmann, head of currencystrategy at Commerzbank AG in Frankfurt. “This is the mostimportant driver.”

Euro Forecasts

The euro will probably end the year around current levels asinvestors buy German bonds as a haven, lending support to thecurrency amid outflows from weaker countries, Leuchtmann said. Themedian estimate of analysts' predictions compiled by Bloomberg isfor the euro to end 2012 at $1.30.

The euro has weakened 3.6 percent over the past six months, theworst performance among the 10 developed-nation currencies trackedby Bloomberg Correlation-Weighted Indexes. The dollar rose 1.4percent, and the yen dropped 1.1 percent.

The yen strengthened against all of it 16 major counterparts,and the dollar advanced versus all but the yen, amid speculationthe global economy is stalling, boosting demand for saferassets.

Growth in German exports slowed to 0.9 percent in March from 1.5percent in February, the Federal Statistics Office in Wiesbadensaid today. U.S. initial jobless claims climbed by 4,000 to 369,000last week, according to a Bloomberg News survey before the LaborDepartment report tomorrow.

The dollar strengthened for an eighth day against the Swissfranc, climbing 0.5 percent to 92.79 centimes. The franc was littlechanged at 1.2010 per euro.

Sterling slipped 0.4 percent to $1.6092 and was little changedat 80.49 pence per euro before the Bank of England's MonetaryPolicy Committee decides tomorrow whether to add more stimulus toits existing 325 billion pounds ($485 billion) of bondpurchases.

Sales at U.K. stores open at least 12 months, measured by value,declined 3.3 percent from a year earlier, the London-based BritishRetail Consortium said today. That's the biggest monthly drop sinceMarch 2011. Including stores open less than 12 months, salesdecreased 1 percent.

Australia's dollar weakened for a second day versus its U.S.counterpart after Prime Minister Julia Gillard said returning thebudget to surplus will give the central bank “maximum room to move”in setting interest rates.

Cash Surplus

The nation will have an underlying cash surplus of A$1.54billion ($1.55 billion) in the 12 months to June 30, 2013,Treasurer Wayne Swan said in the annual budget speech yesterday.Expenditures are forecast to decline to A$364.2 billion next year,the first drop in figures dating back to 1971.

The so-called Aussie weakened 0.8 percent to $1.0043 aftertouching $1.0033, the lowest since Dec. 20, the last time it tradedat parity with the greenback.

UBS AG recommended investors sell the euro at $1.3075, targeting$1.2850 with a stop-loss order at $1.3165, Richard Adcock, head offixed-income technical strategy in London, wrote in a noteyesterday. A stop loss is a preset instruction to exit a trade at acertain level in case a bet goes the wrong way.

The euro may fall to its January low of $1.2628 should thecurrency decline below the 62 percent retracement of theJanuary-to-March advance at $1.2954, Adcock wrote, citing Fibonaccianalysis.

Fibonacci analysis is based on the theory that prices advance ordecline by certain percentages after reaching a new high orlow.

Bloomberg News

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