Euro Hits 22-Month Low

Currency weakens on pessimism about the outcome of today’s EU summit.

The euro fell to its weakest level against the dollar since July 2010 on speculation a summit of European Union leaders will provide no new measures to stem the sovereign-debt crisis.

The shared currency extended losses after dropping below 100 yen for the first time since February and weakening to less than $1.26, price levels where traders who follow technical analysis said sell orders were clustered. The yen climbed at least 0.7 percent versus all its major peers after the Bank of Japan left its asset-purchase fund unchanged.

“Markets are becoming a bit more pessimistic that anything material will come out of the meetings this evening, and as a consequence the short-covering rally in the euro was unimpressive,” said Robert Sinche, global head of foreign-exchange strategy at RBS Securities Inc. in Stamford Connecticut. “Risk appetite and the euro hitting the lows of the year are emboldening investors.” A short is a bet an asset will decline.

The euro fell 0.8 percent to $1.2583 at 11:26 a.m. New York time, after touching $1.2564, the least since July 13, 2010. It was 1.6 percent weaker at 99.87 yen, after falling to 99.68, the least since Feb. 6. The yen appreciated 0.8 percent to 79.32 per dollar.

Financial turmoil in the euro bloc will come up at tonight’s meeting in Brussels only “at the very end,” European Council President Herman Van Rompuy said in a letter before a gathering of EU officials.

The dollar has gained 4.5 percent over the past month as investors sought the safest assets amid a deepening financial crisis, Bloomberg Correlation-Weighted Indexes show. The yen, the best performer, added 7.3 percent, while the euro declined 0.5 percent, according to the indexes, which track 10 developed-nation currencies.

Today’s Brussels gathering takes place as Greece prepares to hold new elections on June 17 after an anti-bailout party surged to second place in balloting on May 6, boosting speculation that the country may exit the currency bloc.

“We know the summit is not going to resolve anything and it will be hard to find particularly positive headlines,” said Nick Bennenbroek, head of currency strategy at Wells Fargo & Co. in New York. “We’ve seen a lot of the reaction to the meeting has come in the form of anticipation of nothing.”


 

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