Euro Falls Versus Dollar Before Slovakia Vote; Sterling Weakens
Oct. 11 (Bloomberg) -- The euro dropped from the highest level in almost three weeks against the dollar as Slovakian lawmakers prepared to vote on a proposal to retool the euro region's bailout fund.
The dollar rose against most of its major counterparts on increased demand for the most liquid assets. The pound weakened as U.K. manufacturing production contracted for a third month. New Zealand's dollar fell as the nation's budget deficit was wider than forecast. The euro slid even as a European Union, International Monetary Fund and European Central Bank team approved the next tranche of aid to Greece.
"Uncertainty persists because there is just not the political consensus to tackle these bigger issues in the euro zone," said Michael Woolfolk, senior currency strategist in New York at Bank of New York Mellon Corp., the world's largest custodial bank, with more than $26 trillion in assets under administration. "We are treading water, waiting today."
The euro fell 0.2 percent to $1.3612 at 10:41 a.m. in New York after rising 2 percent yesterday in the biggest gain since July 2010. The shared currency reached $1.3699 yesterday, the highest level since Sept. 21. The euro dropped 0.2 percent to 104.36 yen today. The dollar was little changed at 76.71 yen.
South Korea's won was the best performer against the dollar among the most-traded currencies, rising as much as 0.9 percent to a two-week high of 1,160.80.
Korean Reserves
More than $300 billion of foreign-exchange reserves will help the nation weather market volatility, the Dong-A Ilbo newspaper reported, citing Benjamin Hung, chief executive officer of Standard Chartered Plc's Hong Kong unit.
The New Zealand dollar slid 0.6 percent to 77.90 U.S. cents after government financial statements showed the budget deficit widened to a record NZ$18.4 billion ($14 billion) in the year through June, from a NZ$16.7 billion estimate in the May budget.
Sterling slid for the first time in three days versus the dollar, dropping 0.3 percent to $1.5622 after a report showed Britain's manufacturing fell in August more than forecast.
Factory output fell 0.3 percent from July, when it slid a revised 0.2 percent, the Office for National Statistics said today in London. The median forecast of 24 economists in a Bloomberg News survey was for a drop of 0.2 percent. Overall industrial output, which includes mining and oil and gas, rose 0.2 percent.
Focus on Fundamentals
"Attention is once again returning to U.K. fundamentals, and the outlook is not encouraging," said Elizabeth Gregory, a market strategist in Geneva at Swissquote Bank SA, a unit of the financial and trading-services company Swissquote Group.
The Dollar Index rose 0.2 percent to 77.738 after yesterday's 1.4 percent decline, the biggest loss on a closing basis since July 13. The IntercontinentalExchange Inc. gauge, used to track the greenback against the currencies of six major U.S. trading partners, is weighted 57.6 percent to the euro.
The Standard & Poor's 500 Index gained 0.3 percent after rallying 3.4 percent yesterday. Alco Inc. reports its earnings today after the U.S. stock market closes, signaling the start of the earnings season. The S&P GSCI Total Return Index of 24 commodities was little changed after rising for four days.
"The euro zone, until we get into earnings season, is going to give the market direction," said Fabian Eliasson, head of U.S. currency sales at Mizuho Financial Group Inc. in New York. "There is a lot of local jawboning that is going around, and people have their own agendas, causing volatility."
Slovakia Vote
Slovakia may approve the euro region's retooled bailout fund after a political storm that will probably topple Prime Minister Iveta Radicova's governing coalition.
The nation's largest opposition party, which pledged to reject the motion today, will back the revamped European Financial Stability Facility in a second vote if lawmakers fail to approve it today, Robert Fico, the group's leader, told reporters today in the capital, Bratislava. That would give the measure a majority.
There is no date set for a repeat vote. The nation is the only member of the euro area that hasn't ratified the measure, following approval in Malta yesterday.
European Union and International Monetary Fund officials indicated that Greece will get an 8 billion-euro ($11 billion) loan next month under a 110 billion-euro bailout.
Two days ago, Germany and France set as a deadline the Nov. 3 meeting of the Group of 20 for a breakthrough in handling Europe's debt crisis after a meeting of German Chancellor Angela Merkel and French President Nicolas Sarkozy.
To contact the reporters on this story: Allison Bennett in New York at abennett23@bloomberg.net Emma Charlton in London at echarlton1@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
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