Euro Near One-Week Low Before ECB Meet, Spanish Auctions

The euro fell to within 0.4 percent of a one-week low versus the dollar before European Central Bank policy makers meet today amid political turmoil that threatens to renew the region’s sovereign-debt crisis.

The 17-nation currency weakened from its highest since April 2010 against the yen before Spain prepares to auction bonds today amid calls for Prime Minister Mariano Rajoy to resign. ECB President Mario Draghi may indicate concern the economy is weak even as the bank hold rates, according to analysts.

“Given the euro’s strength, Draghi is likely to remind us that the economy is still weak rather than giving some optimistic comments,” said Kikuko Takeda, a senior currency economist in London at Bank of Tokyo-Mitsubishi UFJ Ltd. “I see the euro falling at a modest pace in the mid- to long-term.”

The euro weakened to $1.3513 at 10:16 a.m. in Tokyo from $1.3523 in New York. It reached $1.3459 on Feb. 5, the least since Jan. 29. The currency fell 0.3 percent to 126.22 yen after yesterday touching 127.71, the strongest since April 2010. The yen rose 0.3 percent to 93.41 per dollar after depreciating to 94.06 yesterday, the weakest since May 2010.

The ECB, which has held its main refinancing rate at a record-low 0.75 percent since July, will make no change today, according to all 60 economists surveyed by Bloomberg News. Draghi may make more dovish remarks, according to analysts.

Easing Options

“Our economists suggest that Mr. Draghi will probably soften the overall tone at the press conference, signaling that easing options are still available if needed,” New York-based Vassili Serebriakov, a currency strategist at BNP Paribas SA, wrote in a note to clients. “There are plenty of reasons to justify a more defensive euro tone.”

Spain will auction securities due in 2015, 2018 and 2029 today after the nation’s benchmark 10-year bond yield rose 24 basis points, or 0.24 percentage point, this week to 5.45 percent yesterday.

Prime Minister Rajoy faced calls to step down amid contested reports of corruption in his party. He has imposed the harshest austerity measures in Spain’s democratic history to curb the budget deficit and lower borrowing costs.

(source: Bloomberg)