By Catarina Saraiva and Garth Theunissen
June 13 (Bloomberg) -- The euro slid to a record low versus the Swiss franc as concern increased that European leaders may not be able to find common ground on a Greek bailout.
European Central Bank President Jean-Claude Trichet and German Finance Minister Wolfgang Schaeuble are at odds about whether Greek bondholders should be compelled to incur losses in the nation?s second bailout in 14 months. The dollar dropped against most of its counterparts before a report this week forecast to show U.S. retail sales declined in May. New Zealand?s dollar fell after its second-biggest city was struck by aftershocks of the February earthquake.
?This conflict between the ECB and Germany has proven to be problematic for the markets,? said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. ?It?s still unresolved. It?s causing a few headaches and stress for the markets. The Swiss and yen have been outperformers today.?
The shared currency weakened 0.8 percent to a record low 1.20043 versus the franc, before trading at 1.20219 at 1:05 p.m. in New York. The euro fell as much as 0.3 percent to $1.43, the weakest intraday level since May 31, before trading at $1.4352.
The Dollar Index, which measures the greenback against the currencies of its six major trade partners, fell 0.1 percent to 74.756. The yen strengthened 0.2 percent to 80.17 per dollar after earlier touching 80.69, the lowest level since June 3.
Juncker Comments
Luxembourg?s Prime Minister Jean-Claude Juncker, who leads the group of euro-area finance ministers, said in an interview on Radio Berlin-Brandenburg June 11 that any bailout for Greece must include ?voluntary? investor participation. Juncker is trying to bridge the gap between Germany?s Schaeuble, who wants Greek bondholders to accept longer maturities of up to seven years on the debt, and Trichet, who said imposing losses on creditors would be akin to a default.
?We seem to be swaying from one side to the other side and the uncertainty is clearly increased and that?s never good for markets,? said Camilla Sutton, head of currency strategy at Bank of Nova Scotia in Toronto. ?We?re seeing ongoing debate in terms of all the overhanging questions that are there for the bond market, Greece and the euro.?
European officials are racing to find a plan to stem Greece?s debt crisis by June 24 while sharing the cost of an added rescue with bondholders. Trichet signaled on June 9 that the central bank may raise interest rates in July while reiterating that inflation will fall below its 2 percent limit next year.
Greek Downgrade
The euro pared its gains versus the dollar after Standard & Poor?s lowered its long-term sovereign credit ratings on Greece three levels to CCC. The rating?s outlook is negative. A restructuring would likely ?result in one or more defaults under our criteria,? S&P said in a statement today.
Retail sales in the U.S. fell 0.5 percent in May, the first drop since June, according to the median estimate of 63 economists in a Bloomberg News survey. The Commerce Department will release the report June 14.
Federal Reserve Bank of Richmond President Jeffrey Lacker said recent U.S. economic data have prompted him to reconsider his forecast for growth.
The data are ?causing us to rethink our outlook for growth,? Lacker said to reporters after a speech today in Roanoke, Virginia. ?We could be stuck below trend for some time,? he said.
BOJ Meets
The yen weakened versus most of its major peers after a report showed Japan?s factory orders declined 3.3 percent in April from March, when they rose 1 percent, the Cabinet Office said today.
Two out of 14 economists surveyed by Bloomberg News said Bank of Japan policy makers meeting today and tomorrow may decide to expand asset purchases, four said it may do so in August, and all but one said the next BOJ move will be to ease.
New Zealand?s dollar weakened after quakes with magnitudes of 5.2 and 6.0 struck near Christchurch, according to the U.S. Geological Survey. In February, the city was devastated by a magnitude-6.3 temblor that killed more than 180 people and closed the central business district.
?The aftershock in Christchurch created all these new fears of possibly more fiscal spending and more contraction in the economy there,? said Boris Schlossberg, director of research at online currency trader GFT Forex in New York. ?If you see further risk aversion flows, it?s very vulnerable to drive all the way down to 80.?
Kiwi Trend
The kiwi slumped 1.2 percent to 81.15 U.S. cents.
Sweden?s krona is joining the franc as a favored currency for traders seeking to profit from Germany?s economic expansion while avoiding the debt crisis roiling Europe.
The krona may climb to its highest level in more than 10 years against the euro as the fastest growth in Europe spurs the Riksbank to keep raising interest rates, according to data compiled by Bloomberg. It?s a cheaper way to participate in German growth than the traditional haven, the Swiss franc, which is the most overvalued currency against the euro and the dollar as measured by the relative cost of goods and services.
The Swedish currency reached its weakest level against the euro this year, reaching 9.1339 per euro, the weakest since Dec. 14, before trading at 9.1188.
--Editors: Paul Cox, Greg Storey
To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Garth Theunissen in London gtheunissen@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
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