Euro falls to 8 month low as Greece is set to miss debt targets

Tom Tong03/Oct/2011Currency Updates

GBP

U.K. house prices fell for a fifth month in September and the pace of the decline may accelerate in the coming months, property researcher Hometrack Ltd. said.

The average cost of a home slipped 0.1 percent from August and was down 3.5 percent from a year earlier, the London-based company said today in an e-mailed report on its monthly survey of real-estate agents. Prices based on Hometrack’s measure have fallen in every month but one since July 2010.

Nationwide Building Society said last week that downside risks to Britain’s property market have increased as Europe’s debt crisis undermines confidence and global growth prospects weaken. Almost a third of economists in a Bloomberg News survey say the Bank of England will restart its asset-purchase program this week to support a faltering recovery.

“Events in the euro zone, together with pressures on the domestic economy and household incomes are clearly taking their toll on consumer confidence,” Richard Donnell, Hometrack’s director of research, said in a statement. “We expect demand to continue to slip back” and see “a likely acceleration in the level of monthly price falls over the final quarter.”

New property listings rose 22 percent in the nine months through September, double the pace of demand growth, Hometrack said. On the month, new buyers registering with real-estate agents fell 2.6 percent from August.

EUR

The euro fell to an eight-month low against the dollar before European finance ministers gather today to weigh the threat of a default in Greece, which is making fresh budget cuts to secure an international bailout.

The 17-nation euro slid for a second day ahead of the meeting, at which officials will discuss how to shield banks from the region’s debt crisis and consider increasing their rescue fund.

Europe’s “crisis will probably be stretched for many, many months,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp., Australia’s second-largest lender. “A crisis prolonged means the euro will keep sliding.”

USD

After all the concern that the U.S. is debasing its currency, the dollar beat stocks, bonds and commodities for the first time since May as investors sought refuge from slowing growth and Europe’s sovereign-debt crisis.

The U.S. currency rose 6 percent in September, according to Intercontinental Exchange Inc.’s Dollar Index, beating returns of 1.6 percent by Bank of America Merrill Lynch’s U.S. Treasury Master Index. The MSCI All-Country World Index of stocks in 45 countries lost 8.9 percent, the largest monthly drop since May 2010. Raw materials measured by the Standard & Poor’s GSCI Total Return Index of 24 commodities slid 12 percent.

Gains for the world’s reserve currency show investor confidence in the nation’s creditworthiness after Standard & Poor’s stripped the U.S. of its AAA rating two months ago. Even with Republican leaders in Congress joining critics of Federal Reserve stimulus measures, the currency bested all 16 of its most-traded counterparts in September for the first month in more than three years.

“In a time of crisis you want to be holding the most liquid currency out there,” Aroop Chatterjee, a currency strategist at Barclays Capital Inc. in New York, said in a telephone interview Sept. 27. “It waters down the argument for ‘the end of the dollar as a reserve currency.’”

Strategists reduced forecasts for the euro versus the dollar and sterling by the most since June 2010 last month. Predictions the Canadian dollar will gain against the greenback dropped the most since October 2008.

The dollar touched a two-week high versus the yen after a survey showed that sentiment at Japan’s biggest manufacturers remained below levels seen before a record earthquake struck in March. The baht slid to the lowest in more than a year as data showed Thailand’s export growth slowed.

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Written by Tom Tong

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