American focus: the euro dropped below 100 yen

The euro dropped below 100 yen for the first time since June 2001 in a sixth straight day of decline on concern Europe’s debt crisis will weigh on the region’s economic growth. Europe’s shared currency may weaken to 99 yen in the first quarter of 2012, according to the median forecasts of 35 analysts in a Bloomberg News survey. The shared currency will weaken to $1.28 in the second quarter of next year, according to a separate survey of 41 analysts. Two years of summits have failed to contain a European debt crisis that has led to bailouts of Greece, Ireland and Portugal and now threatens Italy and Spain. French President Nicolas Sarkozy will go to Berlin on Jan. 9 to resume talks with German Chancellor Angela Merkel to end the turmoil, according to an official familiar with the matter. The leaders aim to complete revisions to Europe’s fiscal rulebook by March, following decisions made at a Dec. 9 summit, and are reassessing plans to cap the overall lending of their permanent rescue facility at 500 billion euros ($649 billion). Spain’s budget deficit will reach 8 percent of gross domestic product this year, more than the previous government’s forecast of 6 percent, government spokeswoman Soraya Saenz de Santamaria said at a press conference in Madrid.

The 17-nation currency headed for its first back-to-back annual decreases versus the dollar in a decade. The shared European currency is the worst performer among 10 developed-nation currencies this year, declining 2.1 percent, according to Bloomberg Correlation-Weighted Currency Indexes. The dollar has advanced 1 percent and the yen has gained 5.2 percent. The The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, fell 0.3 percent to 80.189. The measure is headed for a 1.6 percent gain this year after appreciating 1.3 percent last year, the first time it’s gained two years in a row since 2001.

China’s yuan climbed to a 17-year high on signs the central bank favors the currency’s appreciation to prevent capital outflows. The yuan advanced for a third day as the central bank set its reference rate 0.2 percent stronger at 6.3009 against the greenback, the highest level since a dollar peg ended in 2005. Hong Lei, a spokesman for the foreign ministry, said on Dec. 28 that China will continue to push for exchange-rate flexibility. Chinese manufacturing shrank less this month than in November, data showed today.