Oct. 4 (Bloomberg) -- The euro declined from a six-month high against the dollar as concern Europe’s major banks are undercapitalized reduced demand for the region’s assets.
The 16-nation currency weakened versus all of its major counterparts as a Swiss government-appointed panel said UBS AG and Credit Suisse Group AG should almost double the capital required under Basel Committee on Banking Supervision rules announced last month. The Swiss franc appreciated versus the euro as stocks fell, discouraging demand for riskier assets.
“The talk about the need for Basel 3 changing restrictions is highlighting the banking sector weakening and highlighting weakness in Europe particularly,” said Camilla Sutton, a Bank of Nova Scotia currency strategist in Toronto.
The euro slid 0.7 percent to $1.3689 at 8:53 a.m. in New York, from $1.3791 on Oct. 1. It touched $1.3807 earlier today, the highest level since March 17. The euro depreciated 0.6 percent to 114.06 yen, from 114.78 yen. The yen was little changed at 83.30 per dollar, compared with 83.22, after earlier weakening to 83.87.
Switzerland’s biggest banks should hold total capital equal to at least 19 percent of their assets, weighted according to risk, compared with 10.5 percent level the Basel Committee on Banking Supervision announced last month, the Swiss panel said.
In a sign the U.S. housing market is stabilizing, the number of contracts to purchase previously owned homes probably increased in August for a second month.
U.S. Housing
The National Association of Realtors’ index of pending home resales rose 2.8 percent in August after a 5.2 percent gain the prior month, according to the median forecast of 30 economists in a Bloomberg News survey. A separate report may show a transportation equipment-led decline in factory orders.
The Bank of Japan begins a two-day policy meeting today in Tokyo at which policy makers are expected to discuss the need for additional measures to spur growth.
The central bank “might introduce further liquidity into the markets,” analysts at Commerzbank AG headed by Ulrich Leuchtmann in Frankfurt wrote in an e-mailed report today. “Some market participants are also expecting the purchase of further bonds. Whichever way the BOJ is going to go, it’s unlikely to create positive momentum” for the yen, they wrote.
The Bank of Japan is expected to increase its 30-trillion yen ($359 billion) credit program for lenders to encourage bank lending when the meeting ends tomorrow, 14 of 17 economists surveyed by Bloomberg News said. One economist forecasts the bank will cut the overnight loan rate to zero from 0.1 percent and buy more government bonds.
Japan’s Wages
Japan’s wages unexpectedly stagnated in August, failing to rise for the first time in six months, adding to concern the country’s consumers won’t be able to drive growth in place of slowing demand abroad. Monthly wages including overtime and bonuses were unchanged from a year earlier at 274,232 yen ($3,288), the Labor Ministry said today.
The government intervened in the foreign-exchange market for the first time since 2004 on Sept. 15 to protect the export- driven recovery.
--Editors: Dennis Fitzgerald
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