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Euro Drops for Fifth Day on Bets ECB Will Cut Rates; Rand Falls

November 1, 2013

Nov. 1 (Bloomberg) -- The euro slid for a fifth day against the dollar as signs of economic weakness in the single-currency bloc fueled speculation the European Central Bank will cut interest rates as soon as at its meeting next week.

The 17-nation currency headed for its biggest weekly loss since July 2012 after data yesterday showed the region’s inflation unexpectedly slowed and the jobless rate climbed to a record. The dollar gained versus its major peers as a gauge of U.S. manufacturing rose to a two-year high. South Africa’s rand dropped after the nation’s trade deficit grew more than forecast. A gauge of currency volatility rose for a second day.

"The European recovery, which we always knew was a bit fragile, just looks that much weaker," Richard Franulovich, the chief currency strategist for the northern hemisphere at Westpac Banking Corp. in New York, said in a phone interview. "As a result of those numbers from yesterday, there are quite a few people formally calling for the ECB to ease policy."

The euro fell 0.6 percent to $1.3501 at 11:04 a.m. in New York, extending this week’s slide to 2.2 percent, the most since the five days ended July 6, 2012. It reached $1.3483, breaching its 50-day moving average of $1.3487. The shared currency declined 0.2 percent to 132.38 yen after sliding to 132.61, the lowest since Oct. 11. The yen lost 0.4 percent to 98.78 per dollar after gaining 0.6 percent earlier.

 

Volatility Rises

 

A measure of price swings among the currencies of Group of Seven nations increased to a two-week high. The JPMorgan G7 Volatility Index reached 8.12 percent, the highest since Oct. 17. It dropped to 7.48 percent Oct. 28, the lowest this year. The 2013 average is 9.37 percent.

The South African rand weakened for a sixth day against the dollar, the longest stretch of losses in five months, after the nation posted a trade deficit of 18.9 billion rand ($1.9 billion) in September. Economists in a Bloomberg survey forecast a gap of 16.4 billion rand.

The currency slid 1.1 percent to 10.1546 per dollar after falling to 10.0220, the weakest since Sept. 6.

Sweden’s krona dropped versus most major peers after a report showed manufacturing expanded less than forecast. Swedbank Markets said its gauge of factory output fell to 52 in October from 56 the previous month. A Bloomberg News survey predicted a decline to 54.5.

The krona dropped 0.7 percent to 6.5309 per dollar, its fifth straight daily loss. It was little changed versus the euro at 8.8063. The Swedish currency has depreciated 1.9 percent versus the dollar since Oct. 30, the biggest two-day decline since June.

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