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Euro Trades Close to Two-Month Low on Greece; Aussie Strengthens

Nov. 12 (Bloomberg) -- The euro traded close to a two-month low against the dollar as European policy makers prepare to meet to seek a plan to maintain Greece’s solvency and keep the nation in the common currency.

Europe’s shared currency approached a one-month low against the yen. The Japanese currency was little changed after data showed the nation’s economy contracted in the third quarter at the fastest pace since last year’s record earthquake. The Australian dollar gained against all its major counterparts after a bigger-than-estimated trade surplus in China improved prospects for commodity exports. China’s yuan gained the most in six weeks against the dollar.

“Euro risk factors are dominated by all things Greek,” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “There’s residual uncertainty and the euro is going to remain under pressure.”

The euro rose 0.1 percent to $1.2726 at 8:27 a.m. New York time after falling to $1.2690 on Nov. 9, the weakest since Sept. 7. It was little changed at 101.03 yen, after sliding 2.1 percent last week. The yen strengthened 0.1 percent to 79.39 per dollar.

Finance ministers from the 17-member euro-region will meet at 5 p.m. in Brussels after Greek Prime Minister Antonis Samaras gained enough support from lawmakers in his three-party coalition to pass the 2013 budget.

Bill Redemption

The ministers intend to prevent a 5 billion-euro Greek bill redemption on Nov. 16 from triggering an accidental default, while they’re unlikely to ratify a 31.5 billion-euro payment to Greece that has been frozen since June, a European official said Nov. 9.

“Although the Greek budget vote passed parliament comfortably, the European Union could decide to delay the payment of the 31.5 billion euro tranche to Greece until the end of the month,” Morgan Stanley strategists led by Hans Redeker, the London-based head of foreign-exchange strategy, wrote in a note to clients. “We expect the euro to remain under pressure in the near term,” against the dollar, they wrote.

The 17-nation common currency will fall toward its 100-day moving average at $1.2639, they predicted.

The 14-day relative-strength index for the euro against the dollar was 33.5, the lowest level since July 24, according to data compiled by Bloomberg. A level below 30 indicates an asset may be “oversold” and has weakened too quickly.

Currency Indexes

The euro has fallen 3.3 percent this year, the second-worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes after the yen, which has declined 4.7 percent. The dollar has dropped 1.3 percent.

In Japan, gross domestic product fell an annualized 3.5 percent in the three months through September, after a revised 0.3 percent gain the previous quarter, the Cabinet Office said in Tokyo today. The median of 23 estimates in a Bloomberg News survey was for a 3.4 percent drop.

Bank of Japan Governor Masaaki Shirakawa said today that “the bank is committed to continuing with aggressive monetary easing,” underscoring his struggle to reverse a decade of deflation. The BOJ increased its asset-purchase program by 11 trillion yen to 66 trillion yen on Oct. 30. Shirakawa and his board next gather on Nov. 19-20.

Australia’s dollar has strengthened 1.1 percent this year, the Bloomberg correlation-weighted indexes show.

China’s exports exceeded imports by $32 billion in October, the customs administration said Nov. 10, compared with a $27.3 billion trade surplus estimated by economists surveyed by Bloomberg. China is Australia’s biggest trading partner.

“The Chinese story improving would tend to be somewhat supportive of Australian dollar strength going forward,” said Gavin Stacey, a Sydney-based strategist at Barclays Plc.

The so-called Aussie rose 0.5 percent to $1.0438 and strengthened 0.4 percent to 82.85 yen.

The yuan strengthened 0.26 percent to close at 6.2291 per dollar in Shanghai, the biggest gain since Sept. 28, according to the China Foreign Exchange Trade System.

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