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Euro Trades Near 2-Week Low Before Debt Sales, EU Summit

Published: June 26, 2012 | 8:45 am
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The euro was 0.4 percent from a two- week low against the dollar amid concern that a European Union summit this week will fail to produce decisive measures to end the currency bloc’s financial woes.

The 17-nation euro was little changed against the yen after dropping the most this month yesterday, before Spain and Italy sell debt. Moody’s Investors Service downgraded 28 Spanish banks, citing the country’s sovereign debt and rising real estate losses.

“We expect a disappointing outcome from the EU leaders’ summit, so therefore we think that the euro may weaken into the week’s end,” said Richard Grace, chief currency strategist and head of international economics in Sydney at Commonwealth Bank of Australia (CBA), the nation’s biggest lender. “The U.S. dollar is going to remain quite firm.”

The euro traded at $1.2516 at 8:54 a.m. London time after touching $1.2471 yesterday, the weakest level since June 12. It depreciated 0.1 percent to 99.51 yen, following a 1.5 percent decline yesterday, the biggest drop since May 30. The dollar slipped 0.2 percent to 79.51 yen.

The two-day EU summit in Brussels starting June 28 is the first meeting of European leaders since Greek parliamentary elections on June 17 that saw victories for pro-bailout parties. France and Italy are urging Germany to take decisive action to end the debt crisis, now in its third year.

The euro is down from this year’s high of $1.3487 on Feb. 24, and has fallen 3.4 percent against the dollar this year as the financial turmoil in the region deepened.

Italy is scheduled to sell inflation-linked securities maturing in September 2016 and September 2026 today, and as much as 3 billion euros of May 2014 zero-coupon notes. Spain will offer three- and six-month bills.

Moody’s downgraded six Spanish banks by four levels yesterday and 10 by three grades, with the rest getting one- and two-tier declines.

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