Euro Slumps Ahead of Eurogroup Meeting - 3.10.2011

Asian stocks dropped today, while the euro fell to an eight-month low against the dollar amid concerns about the world economic growth and before European officials are going to weigh the risk of a Greek default today on a meeting which will be definitely the key event of the day. US Dollar The dollar gained ground in Asian trading hours today against all its major counterparts, remaining flat against the yen. As for macroeconomic data, a report today may show US manufacturing maintained growth. The US Institute for Supply Management factory index probably fell to 50.3 from 50.6 in August, according to preliminary estimations, with figures above 50 indicating expansion. The greenback was also supported on Friday as consumer spending in the US slowed in August and incomes unexpectedly dropped for the first time in almost two years, forcing households to dip into savings. Purchases rose by 0.2% after a 0.7% increase in July, Commerce Department figures showed. The dollar index, supported by investors’ run into safety, rose today to 79.15, the highest level since January 20. Euro The euro dropped to an eight-month low against the dollar this morning (1.3312) before European finance ministers gather today to consider an enhancement to the region’s rescue fund and estimate the risk of a Greek default. They are not expected however to make a decision on Greece’s next aid payment until the latest report on the country's deficit reduction progress is completed. A separate meeting of the Eurogroup finance ministers has been tentatively planned for October 13 to approve the aid. The Greek government in its turn said yesterday that it approved 6.6 billion euros of austerity measures, which will help cut the deficit to 6.8% of gross domestic product from 8.5% this year. “Important decisions which need to be taken on a European level depend first and foremost on us,” Papandreou told his ministers last night, according to a government's statement. “We need to show our dedication to reaching the goals.” The new measures include state workers’ wage reductions, earlier retirement or even firing and is aimed to save 300 million from the government wage bill in 2012. The government has also reported that it expects the national economy to contract by 5.5% in 2011, deeper than a previous forecast of 3.9%. Canadian Dollar The loonie depreciated to a 13-month low as concern the global economy is sinking back into recession spurred a haven rally in the US currency and dimmed the outlook for commodity prices. Crude oil, Canada’s largest export, posted its largest quarterly decline since the 2008 financial crisis, as signs of slowing growth in China, the US and Germany heightened concerns that fuel demand will suffer. Contracts of light crude oil for November delivery fell today to 77.7 dollars per barrel. Pair USD/CAD rose today to 1.0522 from 1.0142 last Tuesday.