Forex: Weekly review

On Monday the yen rose against all of its 16 most-traded counterparts amid investor concern that Chinese manufacturing was weaker as official government data conflicted with a private-sector purchasing-manager index. The Chinese purchasing manager’s index released by the country’s logistics federation and National Bureau of Statistics for March rose to a one-year high of 53.1. In contrast, a PMI from HSBC Holdings Plc and Markit Economics showed manufacturing contracting and export orders declining. The index fell to 48.3 in March from 49.6 the previous month.

On Tuesday the dollar fluctuated after touching an almost one-month low against the euro before the Federal Open Market Committee releases minutes of its March meeting where policy makers raised their assessment of the economy. The FOMC will release minutes of its March 13 meeting when policy makers raised their economic assessment while repeating that “exceptionally low” interest rates may be needed through late 2014. Chairman Ben S. Bernanke still said on March 26 that further stimulus may be needed to lower unemployment.

On Wednesday the euro lost the most in almost a month against the dollar after demand declined at a Spanish bond auction, adding to concern the region is struggling to overcome its sovereign-debt crisis. Spain sold 2.59 billion euros of bonds today, less than its maximum target of 3.5 billion euros, the central bank said. Demand for notes maturing in 2015 was 2.41 times the amount allotted, down from 4.96 at the previous sale of the maturity in March. It also sold securities due in 2016 and 2020. The 17-nation currency weakened after the European Central Bank kept its benchmark rate at a record low and President Mario Draghi said the economic outlook remained subject to “downside risks.”

On Thursday the euro fell to a three-week low against the dollar as Spanish and Italian bonds slumped and borrowing costs increased at a French auction, adding to concern the region’s debt crisis is spreading. The 17-nation currency dropped to a three-week low versus the yen as Spain’s 10-year bond yields increased to the biggest spread compared with German bunds since November amid investor concern that Spanish Prime Minister Mariano Rajoy may require international aid. Spain’s 10-year yields increased to 400 basis points, or 4.0 percentage points, more than similar-maturity bunds after demand declined at a Spanish debt sale. Italy’s 10- year yield increased 12 basis points to 5.48 percent. France auctioned 4.32 billion euros of 10-year debt at an average yield of 2.98 percent, up from 2.91 percent at the previous offering on March 1. Borrowing costs for five-year and 15-year debt also increased.

On Friday the euro headed for the biggest weekly drop against the yen in seven months as Spain’s rising borrowing costs fueled concern that the region is failing to contain its debt crisis. The 17-nation currency traded 0.3 percent from a three-week low versus the dollar before data next week that may show German exports fell and growth in French industrial production slowed, adding to evidence that the fiscal woes are hampering the region’s economies. German exports probably decreased 1.2 percent in February from January, when they rose 2.4 percent, according to the median estimate of economists surveyed by Bloomberg News before the report due on April 10. In France, output increased 0.2 percent in February, after gaining 0.3 percent the prior month, another poll showed before the nation’s statistics office releases data the same day.