Euro Drops Prior to Retail Sales Report

By TraderVox.com

Tradervox.com (Dublin) – The 17-nation currency dropped to the lowest in as weakening economic data and political uncertainty in the currency bloc signaled a worsening debt crisis. The euro dropped to its lowest in two weeks against the yen prior to the release of reports projected to show declines in European consumer confidence and Italian retail sales. The Japanese currency advanced against the US dollar as safety seekers opted for the yen over the US currency. The yen climbed to 0.1 percent from one-week high against the dollar as Mariano Rajoy, the Spanish Prime Minister, faces calls to request for international bailout. This has caused losses in Asian stocks, causing a decline in asset related currencies.

According to Hitoshi Asaoka, a Tokyo-based Senior Strategist at Mizuho Trust & Banking Co. indicated that the recent data coming from Europe suggest that the economy will remain weak in the medium term, adding that the Spanish Prime Minister reluctance to ask for international bailout is weighing on the euro. The decline on the euro also came as the MSCI Asia Pacific Index of stocks fell by 1.2 percent. Further, speculation that the Italian Retail Sales fell by 0.8 percent in July, has led to the euro decline. It is also estimated that the overall consumer confidence in the euro zone fell to negative 25.9 in September. If this figure is confirmed, this will be the lowest since May 2009. This report will be released tomorrow by the European Commission.

Euro zone crisis seems to be compounded by the political tensions in Spain where Catalan President Artur Mas has asked for early elections. This has come at a point when Spain has increased its spending and the tax receipts are reported to decline. Spanish Prime Minister has refused to ask for international bailout saying the country will meet its budget goals.

The euro declined by 0.2 percent against the dollar to trade at $1.2868 after it dropped to its least since Sept 13 of $1.2862. It dropped to 99.97 against the yen, the least since September 13. The currency is trading at 0.4 percent low from its Level during the New York session yesterday.

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