By Allison Bennett
May 9 (Bloomberg) -- The euro fell against half its major counterparts after Standard & Poor?s cut Greece?s credit rating, renewing concern the region?s debt crisis is worsening.
Norway?s krone rallied against all of its most-traded counterparts as commodities rebounded from the worst week since 2008, with crude oil gaining. The 17-nation currency erased losses against the dollar after touching a two-week low before a report this week forecast to show the region?s economy grew in the first quarter at a faster pace, supporting the case for higher interest rates. The Australian dollar gained before a Chinese report expected to indicate imports increased.
?The focus has been all about the euro today because the move has been quite significant,? said Mary Nicola, a currency strategist at BNP Paribas SA in New York. ?Euro-zone gross domestic product will be important to see if it reaffirms the strength of the euro-zone economy and adds to the argument of why the European Central Bank should go ahead with rate hikes.?
The euro was little changed at 115.19 yen at 5 p.m. in New York, from 115.44 on May 6, after falling 0.4 percent to 114.99. The euro rose 0.3 percent to $1.4362, from $1.4316, after touching $1.4255, the lowest level since April 19. The dollar dropped 0.3 percent to 80.36 yen, from 80.63.
Implied volatility on one-month options for the euro against the dollar, a gauge of traders? expectations for future currency swings, rose to 12.75 percent, the highest level since Jan. 10. It fell to 9.10 percent on April 5.
Futures Bets
Futures traders increased bets last week to the highest level since 2007 that the euro will gain against the dollar, according to the Commodity Futures Trading Commission. Net longs rose to 99,516 as of May 3, from 68,279 a week earlier.
Australia?s dollar rose for a second day against the dollar and yen as economists forecast Chinese imports rose 28.9 percent in April, indicating monetary policy isn?t crimping the Asian nation?s economic growth. China is the largest importer of Australian raw materials.
The Aussie gained 1 percent to $1.0807 after touching $1.1012 on May 2, the highest level since the currency began trading freely in 1983. The Australian currency climbed 0.7 percent to 86.84 yen, from 86.28.
?China Tightening?
?Potential tightening in China and less easing out of the U.S. mean the outlook for the Aussie dollar is a little more clouded,? said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York, in a radio interview with Tom Keene on ?Bloomberg Surveillance.?
Norway?s krone rallied 1.1 percent to 5.4699 versus the dollar in the best performance among the most-traded currencies as crude rose after its biggest weekly drop since 2008.
Crude oil for June delivery rose 5.9 percent to $102.91 a barrel after tumbling 15 percent last week. Norway is the world?s seventh-largest exporter of crude oil.
?Commodities have stayed relatively resilient,? said Boris Schlossberg, director of research at the online currency trader GFT Forex in New York. ?You are still seeing some relatively good data out of the euro zone, so we are living in a bifurcated world.?
Europe?s Economy
Europe?s economy expanded at a 2.2 percent annual rate in the first quarter after 2 percent pace of expansion in the last three months of 2010, according to the median forecast of 24 economists in a Bloomberg News survey before a May 13 report.
Greece?s credit rating was cut to B from BB- by S&P, which said further reductions are possible, with private investors at risk if maturities are extended on the nation?s emergency-aid package. Another rating cut would make Greece the lowest-rated country in Europe as today?s move left it even with Belarus after the fourth reduction by S&P since April 2010.
?This downgrade is furthering the reality that we?re getting closer to the point of default,? said David Mann, regional head of research for the Americas at Standard Chartered in New York. ?People may use this as a reason to take seriously that it could be a longer wait for a rate hike out of Europe, which would be euro-negative as well.?
Euro Speculation
Officials in Athens spent the weekend denying speculation that Greece was headed out of the euro or into default after a gathering of finance ministers and a Spiegel magazine report that Greece was considering a return to the drachma.
The euro?s decline versus the dollar began May 5, when the European Central Bank held its main refinancing rate unchanged at 1.25 percent and ECB President Jean-Claude Trichet refrained from using the phrase ?strong vigilance? on higher prices, which might have signaled a June boost. Trichet instead said inflation risks will be watched ?very closely.?
Europe?s currency has still risen 2.5 percent this year, according to Bloomberg Correlation-Weighted Currency Indexes, a measure of the currencies of 10 developed nations. The yen has weakened 4 percent, while the dollar is down 5.1 percent.
--With assistance from Liz Capo McCormick in New York. Editors: Dennis Fitzgerald, Paul Cox
To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
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