Euro Retreats Ahead of Debt Auctions

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The Euro slipped off a 2-week peak versus the U.S. Dollar, pushed there on news that the IMF has decided to increase its safety net intended for the Eurozone by 100%. The Euro’s gains were already said to be limited for various reasons, including the upcoming sovereign debt auction for Italy, primarily, and the Netherlands as well; resistance is likely seen at around $1.3375.

As reported at 12:59 p.m. (JST) in Tokyo the Euro was trading at $1.3189, off of last Friday’s high of $1.3225. What is also weighing on the Euro is news that French President Nicholas Sarkozy with nearly 95% of the votes counted, appears to have lost a preliminary challenge to his presidency to an opponent who it is believed will not support austerity as a means to balance the budget.

The Australian Dollar is also retreating following economic data which reinforces expectations that the RBA will be cutting interest rates next week; the AUD/USD slipped 0.4% to $1.0340, holding within the relatively tight trading band of last week. On a quarter-over-quarter basis, the Australian PPI slipped in the first quarter to -0.3%, well below expectations of a rise to 0.4% while on an annualized basis it fell to 1.4%, again below the consensus estimate of 2.2%.(DF)

Euro Drops on French Election; Australian Dollar Declines

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The euro fell for the first time in five days against the yen amid concern the outcome of French presidential elections will disrupt efforts to stem the region’s debt crisis.

Australia’s dollar slid after a report showed the nation’s producer prices fell last quarter, adding to speculation the Reserve Bank will cut interest rates. The yen rose against all of its major peers as France’s Socialist challenger Francois Hollande won more of the first-round vote than incumbent Nicolas Sarkozy, boosting demand for haven assets.

“There is plenty of risk in the French election,” said Junichi Ishikawa, an analyst at IG Markets Securities Ltd. in Tokyo. “Hollande’s victory may mean a collapse of the ‘Merkozy’ axis and that would hamper efforts on the debt crisis,” Ishikawa said, referring to cooperation between Sarkozy and German Chancellor Angela Merkel.

The euro weakened 1.1 percent to 106.57 yen at 8:37 a.m. London time. It dropped 0.6 percent to $1.3140. The Japanese currency strengthened 0.5 percent to 81.09 per dollar.

The Australian dollar fell 0.7 percent to $1.0311 and slid 1.2 percent to 83.60 yen.
Pressure on Sarkozy

Hollande won 28.5 percent of the vote against 27.1 percent for Sarkozy yesterday, the interior ministry said in Paris. Marine Le Pen’s National Front got 18.1 percent of the vote, a record for the party, adding to pressure on Sarkozy to court supporters from the anti-euro Le Pen. The second ballot takes place on May 6.

In the Netherlands, Prime Minister Mark Rutte will meet his cabinet today to discuss a strategy for passing a budget that meets European Union targets. Early elections will probably be called after Geert Wilders’s Freedom Party withdrew its support for the minority government on April 21.

The so-called Aussie dollar declined against all 16 of its major peers. Australia’s producer price index dropped 0.3 percent in the January-to-March period from the prior quarter, when it gained 0.3 percent, the Bureau of Statistics said in Sydney today. The index was forecast to climb 0.4 percent, according to the median estimate in a Bloomberg News survey.