Intervention No Barrier as Euro Loses to Surplus Currencies Most Since ’03

For the first time since at least 2003, investors are fleeing the euro for currencies of countries that don’t depend on international capital markets to finance their budget deficits.

The franc rose 7.3 percent and the yen 4.6 percent in the past 12 months, the biggest gains as measured by Bloomberg Correlation-Weighted Indexes, even as the Swiss and Japanese central banks intervened to weaken their currencies. The euro was little changed versus the dollar in the period as the European Central Bank cut interest rates and lenders in the region brought funds home to meet new capital requirements.

Investor concern the euro is at risk is mounting as bond yields in the 17-nation bloc rise to records, costs to insure its members against default jump and ECB President Mario Draghi says providing a more powerful backstop for governments is outside his authority. Traders are favoring currencies of markets that don’t need foreign capital such as Norway’s krone as banks hoard cash amid the most expensive financing rates in more than three years.

“We’ve had a preference for the Scandinavian currencies, particularly the krone, because Norway has got the current account surplus, it’s soundly managed and it’s not an indebted country,” Frances Hudson, who helps manage about $232 billion as a global strategist at Standard Life Investments in Edinburgh, said in a telephone interview on Nov. 24. “The ECB is going to be loosening its policy, which should take away some of the support for the euro.”