Euro Falls to 3-Month Low on German Unemployment Gain
Frankfurt (May 28) The euro fell to a more-than-three-month low against the dollar as German unemployment unexpectedly increased this month and euro-area lending contracted, boosting the case for more European Central Bank stimulus.
Europe’s shared currency weakened after a measure of money supply in the 18-nation region, known as M3, grew less than estimated, stoking speculation the ECB will cut interest rates when policy makers meet on June 5. The yen strengthened against most of its major peers as U.S. Treasury yields declined. New Zealand’s dollar weakened against all of its 16 major peers as a measure of business confidence fell. Russia’s ruble led gains among the 31 major currencies this month.
“What we’re seeing is continued focus on the increasing likelihood of policy easing next week from the central bank,” Omer Esiner, chief market analyst in Washington at Commonwealth Foreign Exchange Inc., a currency brokerage, said in a telephone interview. “I don’t expect a major rebound ahead of the ECB meeting.”
The euro dropped 0.3 percent to $1.3595 at 3:57 p.m. New York time, after sliding to $1.3589, the least since Feb. 13. The 18-nation common currency weakened 0.4 percent to 138.46 yen. The dollar lost 0.1 percent to 101.85 per yen.
Technical Levels
The 18-nation currency fell below $1.3641, the 200-day moving average, for a fourth day. The 14-day relative strength index fell to 28.1, below the 30 level that signals to some traders an asset has declined too far, too fast, and may be due to reverse course.
“For euro-dollar, the heavy price action continues to develop following the break of the 200-day moving average,” Niall O’Connor, a technical analyst in New York at JPMorgan Chase & Co., wrote in a note today. “Support in the $1.3600 area will be the key initial test now, before the $1.3477 February low.”
The ruble has gained 3.2 percent against the dollar this month, followed by Chile’s peso with a 2.5 percent rally, according to data compiled by Bloomberg. Sweden’s krona and the Czech koruna each dropped 2.1 percent, the biggest losers.
A gauge of volatility in Group of Seven currencies fell to almost the lowest in seven years. JPMorgan Chase & Co.’s volatility index for the currencies of the G-7 nations was at 6.14 percent. It touched 6 percent on May 9, the lowest level since 2007.
