The euro touched its lowest level since 2001 against the yen as speculation German Chancellor Angela Merkel is preparing for a Greek default curbed demand for the 17-nation currency.
The yen advanced against all its most-traded counterparts as demand for refuge increased and as the Swiss National Bank- imposed ceiling on the franc leaves Japan’s currency as one of the few haven assets. The euro weakened earlier to the lowest level versus the greenback since February after bets increased the European Central Bank may have to ease monetary policy to shore up the economy.
“One of the safe havens was taken away -- the Swiss franc -- and the yen is one of the remaining safe havens,” said Carl Forcheski, a director on the corporate currency sales desk in New York at Societe Generale SA. “It’s the uncertainty, the possibility that the ECB might have to respond to the crisis by loosening monetary policy, certainly that could hurt the euro and the market may be taking that into consideration.”
The Standard & Poor’s 500 Index decreased 0.7 percent after falling as much as 1.1 percent. Crude oil futures rose 0.5 percent to $87.70 a barrel and the yield on the 10-year Treasury note fell to a record low 1.8770 percent.
The yield on German bunds, Europe’s benchmark government debt securities, fell to a record 1.71 percent, while rates on Greek securities reached a record high and Italian and Spanish yields rose.
Merkel’s government is debating how to shore up German banks in the event that Greece fails to meet the budget-cutting terms of its aid package and is unable to get a bailout-loan payment, three officials said Sept. 9. Merkel is due to hold talks on the debt crisis with European Commission President Jose Manuel Barroso today.
Germany will decide on a course of action after receiving the results of a Greek progress report, a government spokesman said, speaking on the customary condition of anonymity.
BNP Paribas SA, Societe Generale and Credit Agricole SA, France’s largest banks by market value, led European equity declines after two people with knowledge of the matter said Moody’s Investors Service may cut their credit ratings as soon as this week because of their Greek holdings.