April 6 (Bloomberg) -- The euro declined for a third day against the dollar amid speculation that a plan for Greece to obtain European Union and International Monetary Fund help in cutting its budget deficit may falter.
Europe’s common currency also slid versus the yen as Market News International reported that Greece wants to bypass IMF involvement should it require assistance because the conditions would be too stringent. The pound dropped as U.K. Prime MinisterGordon Brown called an election that polls signaled may fail to result in a majority. The Canadian dollar approached parity with its U.S. peer, the first time the currencies would trade one- for-one since July 2008, as crude oil was near a 17-month high.
The report that Greece “isn’t keen on the IMF being involved in any bailout would seem to throw the whole plan into question,” said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. in London. “As an investor, do you really want to hang around and see what’s happening next? The Greece story is definitely a negative for the euro.”
Europe’s common currency weakened to $1.3408 as of 6 a.m. in New York, from $1.3484 yesterday. The euro dropped to 125.92 yen, from 127.25. The yen strengthened to 93.90 per dollar, from 94.37 yesterday, when it traded at 94.79, the weakest level since Aug. 24.
Greece has been receiving information from the IMF about the conditions it would impose in return for aid and officials found them to be “tough,” and are concerned that they could result in civil unrest, Market News said, citing Greek officials it didn’t identify. Any package would “be an IMF program decided by the IMF as it happens with each and every country,” IMF Managing DirectorDominique Strauss-Kahn said last week.
Dollar Bonds
The euro has weakened 5.5 percent against the yen and 6.4 percent versus the dollar this year on concern Greece will struggle to redress its fiscal shortfall.
Greece needs to borrow 32 billion euros ($43 billion) this year, Petros Christodoulou, director general of the Public Debt Management Agency, said March 31 in a Bloomberg Television interview. The nation may issue between $5 billion and $10 billion in dollar bonds, the Wall Street Journal reported then, citing a Greek government official it didn’t identify.
Sterling fell 1 percent to $1.5150 and was 0.4 percent weaker at 88.52 pence per euro. Brown called the vote for May 6 after meeting with Queen Elizabeth II. An ICM Ltd. poll yesterday showed Brown trailing the opposition Conservative Party by 4 percentage points, enough to make Labour the biggest party in the House of Commons.
Approaching Parity
The Canadian dollar appreciated for a second day, gaining 0.1 percent to C$1.0008 against the U.S. dollar, after earlier reaching the strongest level since July 2008. A Canadian dollar bought 99.92 U.S. cents.
Crude for May delivery declined 0.3 percent to $86.35 a barrel in New York, after closing yesterday at the highest level since Oct. 8, 2008. Futures have gained 8.8 percent this year, while Canada’s currency had advanced 5.3 percent against the U.S. dollar.
The Australian currency rose to the highest since Jan. 19 against the dollar after the central bank raised the main interest rate to 4.25 percent, its fifth rate increase in six meetings, and said borrowing costs need to be “closer to average,” amid an expanding domestic economy and growth in Asia. The currency traded at 92.55 U.S. cents, from 91.85 cents before the decision and 92.14 cents yesterday.
‘Hawkish’ Statement
“The statement is still somewhat hawkish as it’s talking about continuing to move rates to average,” said Amy Auster, head of foreign-exchange and international economics research at Australia & New Zealand Banking Group Ltd. in Melbourne. “They’re now fairly confident that growth in Australia at least is going to be trend or potentially above trend.”
Gains in Japan’s currency were limited as Pacific Investment Management Co., which runs the world’s biggest mutual fund, said investors should hold fewer euros, British pounds and yen. Pimco favors currencies in China, Brazil, Canada and Australia, which deliver attractive returns amid uneven global economic growth.
“We continue to expect a ‘desynchronized’ recovery, with less leveraged emerging economies likely to grow more robustly than the developed economies,” fund manager Paul McCulley, based at the company’s main office in Newport Beach, California, wrote on the company’s Web site.
Yuan Forwards
Chinese yuan forwards rose to the strongest level in more than 10 weeks on speculation the U.S. decision to delay a report on global foreign-exchange policies will make China more willing to let the currency resume appreciation. Treasury Secretary Timothy F. Geithner three days ago announced the postponement of the April 15 deadline for the annual review, which may have resulted in China being labeled a currency manipulator.
Twelve-month non-deliverable forwards advanced to as much as 6.6145, the strongest level since Jan. 20.
“Clearly the market is seeing this as giving China a window of opportunity to move its currency,” said Thomas Harr, a senior foreign-exchange strategist at Standard Chartered Plc in Singapore. “We will likely see more volatility in the central parity rate in May or June, and then you will see more clear depegging in the late second quarter or the beginning of the third quarter.”
The Colombian peso’s world-beating rally is over as Bank of America Corp. and RBS Greenwich Capital Markets predict the central bank will step up dollar purchases to bolster exports and revive economic growth.
The two banks say the peso will drop 9 percent against the dollar by year-end, the biggest forecasted decline among analyst estimates on 33 currencies tracked by Bloomberg, after surging 6.4 percent in the first quarter, the largest gain in emerging markets. The peso is down 0.7 percent since the central bank began buying $20 million a day in the market in March to curb a rally they say left the currency “misaligned.”
