By Yoshiaki Nohara and Ron Harui
May 10 (Bloomberg) -- The euro fell to a six-week low against the yen before Greece sells Treasury bills today amid speculation the nation will need to restructure its debt.
The 17-nation currency dropped against 11 of its 16 major counterparts after Standard & Poor’s cut Greece’s credit rating, renewing concern the region’s debt crisis is escalating. Australia’s dollar slid against 9 of its 16 major peers before Treasurer Wayne Swan releases his budget today amid assurances of “substantial” spending cuts. New Zealand’s dollar dropped after the International Monetary Fund said the currency may be as much as 20 percent overvalued.
“The markets now view a restructuring of Greece’s debt as a possibility, whereas they hadn’t previously,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp., a foreign-exchange margin company. “The euro is likely undergoing a downward correction. We may see risk aversion, which would probably benefit the yen.”
The euro fell to 115.13 yen at 10:40 a.m. in Tokyo from 115.43 yen in New York yesterday. It earlier touched 114.98, the lowest since March 29. The euro dropped to $1.4342 from $1.4365, after declining to $1.4255 yesterday, the weakest since April 19. The dollar traded at 80.28 yen from 80.36 yen. The greenback touched 79.57 yen on May 5, the lowest since March 18.
Australia’s dollar declined to $1.0788 from $1.0807. The currency weakened 0.3 percent to 86.61 yen. New Zealand’s dollar dropped 0.3 percent to 79.29 U.S. cents and fell 0.5 percent to 63.63 yen.
Rating Cut
Greece today is set to sell 1.25 billion euros ($1.79 billion) in an auction of 182-day bills.
S&P lowered Greece’s credit rating to B from BB-, saying that further reductions are possible. That marks the fourth reduction by S&P since April 2010, and another cut would make Greece the lowest-rated country in Europe. The yield on Greek 10-year bonds rose 21 basis points to 15.7 percent yesterday, more than twice the level of a year ago when Greece accepted an international bailout.
Australia will make "substantial" spending cuts in the budget after a rising currency, the nation’s costliest natural disasters and Japan’s earthquake crimped revenue, Swan said yesterday. The government has said the budget will reduce welfare payments to get people back into the workforce and cut 1,000 jobs in the civilian defense industry in the next three years.
The Australian dollar pared earlier losses after a government report showed the trade surplus totaled A$1.74 billion ($1.88 billion) in March, wider than economists’ forecasts of a A$500 million excess.
New Zealand’s currency may be as much as 20 percent overvalued relative to estimates of the equilibrium exchange rate, the International Monetary Fund said.
Part of the overvaluation reflects the large positive interest rate differential, which may dissipate with eventual tightening by major central banks, the Washington-based IMF said as part of an annual review of the country’s economy.
--Editors: Jonathan Annells, Naoto Hosoda
To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.
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