By Ron Harui and Yasuhiko Seki
Feb. 18 (Bloomberg) — The euro traded near a 10-week low against the dollar on concern the region’s banks will disclose increasing losses due to the deepening financial crisis in central and eastern Europe.

The European currency may weaken for a third day versus the greenback as Commerzbank AG, Germany’s second-largest bank, and ING Groep NV, the biggest Dutch financial-services company, may report combined losses of more than 4 billion euros ($5 billion) when they release earnings today, according to Bloomberg News surveys. The yen may gain for a third day against the euro on speculation stock declines will spur investors to sell higher- yielding assets.

“This is a new phase of worry about bank exposure to Eastern Europe,” said Tony Morriss, a senior markets strategist at Australia & New Zealand Banking Group Ltd. in Sydney. “All the uncertainty, the banking sector’s woes and further rate cuts ahead are weighing on the euro.”

The euro traded at $1.2592 as at 10:18 a.m. in Tokyo from $1.2582 late in New York yesterday when it touched $1.2563, the lowest level since Dec. 4. The currency was at 116.14 yen from 116.27, and at 88.34 British pence from 88.37 pence.

The dollar traded at 92.23 yen from 92.41 yesterday when it reached 92.75, the strongest since Jan. 8. It was at $1.4257 versus the pound from $1.4238, and at 1.1675 Swiss francs from 1.1694. The yen rose to 15.8716 versus South Korea’s won from 15.75181, and gained to 60.33 per Singapore dollar from 60.40.

Commerzbank Results

Europe’s currency may decline as Frankfurt-based Commerzbank AG probably had a net loss of 851 million euros last quarter, compared with net income of 201 million euros a year earlier, according to the median estimate of analysts surveyed by Bloomberg.

ING Groep, which also releases fourth-quarter earnings today, reported on Jan. 26 a preliminary pretax loss of 3.3 billion euros, because of writedowns on mortgage securities, debt and equities.

Moody’s Investors Service said yesterday it may cut the ratings of several banks with units in eastern Europe, adding to concern financial turmoil in the region will deepen. Eastern European banks, which are mainly subsidiaries of financial institutions such as Vienna-based Raiffeisen Zentralbank Oesterreich AG and Stockholm-based Swedbank AB, are likely to come under “downward pressure” that may weaken their parent companies, Moody’s said in a report.

Poland’s Currency

Poland’s currency slumped as much as 1.8 percent to 4.9307 per euro yesterday, near 4.9453, the all-time low reached in March 2004. The zloty’s drop is “very dangerous,” and the government will do “everything” to strengthen the currency, Deputy Prime Minister Grzegorz Schetyna said on Radio ZET.

The ICE’s Dollar Index, which tracks the greenback versus the euro, yen, pound, Canadian dollar, krona and Swiss franc, rose to 87.864 yesterday, the highest level since Nov. 21. The index gained 7.9 percent this year.

Demand for the yen may increase after Asian equities fell. The Nikkei 225 Stock Average declined 1.3 percent and the MSCI Asia-Pacific Index of regional shares dropped 0.7 percent, encouraging investors to reduce so-called carry trades.

In carry trades, investors get funds in a country with low borrowing costs and invest in another with higher rates. The risk is that market moves can erase those profits. Japan’s benchmark rate is 0.1 percent, compared with 2 percent in South Korea and 12.75 percent in Brazil.

To contact the reporter on this story: Ron Harui in Singapore atrharui@bloomberg.net; Yasuhiko Seki in Tokyo at yseki5@bloomberg.net.

Last Updated: February 17, 2009 20:34 EST

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