Euro slides below $1.20 on Hungary debt fears

NEW YORK (BestGrowthStock) – The euro fell (Read more about the trembling euro. ) below $1.20 for the first time in more than four years on Friday on concern that Europe’s debt crisis is expanding and as U.S. stocks (Read more about the stock market today. ) slid more than 3 percent.

Investors shunned riskier assets and bought currencies perceived as safe-havens, such as the yen and Swiss franc, as a government report showed U.S. non-farm payrolls grew at a slower-than-expected rate in May. The slump in equities added to the safety bid.

Analysts said the jobs data reinforced the view the U.S. economic recovery may be slow.

Growing concerns that Hungary could be facing a Greek-style debt crisis weighed on sentiment toward the euro as the Hungarian forint fell to a one-year low against the euro.

“The euro was already getting hammered on worries about Hungary, and with the non-farm payrolls not living up to expectations the risk trade is under assault from every angle,” said Boris Schlossberg, director of currency research at GFT Forex, in New York.

The euro fell (Read more about the trembling euro. ) as low as $1.1955, according to EBS trading platform, and in midafternoon trading in New York was 1.6 percent lower at $1.1959.

U.S. employers created 431,000 jobs in May, the Labor Department said, below the 513,000 predicted by analysts polled by Reuters. The jobless rate fell more than expected to 9.7 percent from 9.9 percent in April.

“It’s mainly disappointing,” said Vassili Serebriakov, senior currency strategist at Wells Fargo Bank in New York. “The pace of the recovery in the jobs sector is not as fast as some of the optimistic expectations in the market.”

Against the yen, the dollar was down 1.1 percent at 91.64 yen, after hitting a session low of 91.43 yen, according to Reuters data. The yen also rose against the euro and the Australian and New Zealand dollars.

“The data is clearly risk negative and the purest currency trades are short commodity currencies versus the Japanese yen,” said Alan Ruskin, head of currency strategy at RBS Global Banking & Markets, in Stamford, Connecticut. “But the most pressing problems are in Europe.”

For the week, the euro fell (Read more about the trembling euro. ) 2.5 percent against the dollar, bringing its two-week decline to 4.6 percent, the biggest since the two weeks ended November 2, 2008.

The dollar rose 0.7 percent against the yen this week, with a cumulative increase of 1.6 percent over the last two weeks at current prices.

FRENCH PM’S REMARKS

Selling pressure on the euro started prior to the U.S. jobs report, with the single currency hitting its lowest level against the dollar in more than four years after comments by French Prime Minister Francois Fillon on exchange rates.

Fillon said he was not concerned by the current level of the euro to the dollar and that he saw only “good news” in the parity between the two currencies. Later the remarks were clarified saying his reference to “parity” was about the general evolution of the exchange rate between the euro and the dollar.

Still, the comments also caused the euro to fall steeply against the Swiss franc, which traders attributed to an absence of bids from the Swiss National Bank, which has recently intervened to keep the franc from appreciating.

The euro fell (Read more about the trembling euro. ) 1.2 percent against the Swiss franc and 0.7 percent against sterling.

A daily close under the 50 percent retracement of the 2000-2008 euro rally at $1.2135 would be seen as a bearish signal for the euro, technical analysts said.

Hedge fund adviser Medley Global Advisors issued a report saying China is buying euro-denominated assets in order to underpin the currency, which may have contributed to a slight strengthening in the euro against the dollar earlier.

The Australian dollar fell 2.6 percent against its U.S. counterpart while the New Zealand dollar plunged 2.1 percent. Sterling slipped 1 percent against the dollar to $1.4466.

Stock Analysis

(Reporting by Nick Olivari and Vivianne Rodrigues; Additional reporting by Steve C. Johnson and Gertrude Chavez-Dreyfuss; Editing by Leslie Adler)

Euro slides below $1.20 on Hungary debt fears