By Ron Harui and Yasuhiko Seki
The euro snapped three days of losses against the dollar after Finance Minister Peer Steinbrueck said yesterday Germany would show its “ability to act” as some of the 16 countries sharing the currency struggle with the global financial crisis. Merkel will hold a joint press conference with European Commission President Jose Barroso today in Berlin. The dollar fell against the yen after a technical chart signaled its advance to a six-week high was too rapid.
“Eurozone countries have started to recognize the importance of the financial system and begun to address it properly,” said Akio Yoshino, chief economist in Tokyo at Societe Generale Asset Management Ltd., a unit of France’s third-largest bank. “Optimism about the stabilization of the European financial system may help to halt the recent steep decline of the euro.”
The euro climbed to $1.2603 as of 7:45 a.m. in London from $1.2530 late in New York yesterday, when it touched $1.2513, the lowest level since Nov. 21. Europe’s single currency traded at 117.79 yen from 117.50 yen. The dollar fell to 93.49 yen from 93.79 yen yesterday, when it reached 93.96, the highest level since Jan. 7.
Bank Nationalization
Merkel’s Cabinet yesterday approved draft legislation allowing the state to take over lender Hypo Real Estate Holding AG, paving the way for the first German bank nationalization since the 1930s. The bill, which will be put to parliament on April 3, lets the government carry out compulsory purchases of shares in “systemically relevant” banks.
“This is an appropriate response when it comes to resolving the banking system problem,” SG’s Yoshino said.
The German parliament approved a 480 billion-euro bank rescue plan in October, offering lenders capital infusions, debt guarantees and the option to assume toxic assets. Last month, Merkel agreed to create a so-called “Germany Fund” of as much as $135 billion to help companies weather the global economic crisis. Lawmakers will vote on a second stimulus package tomorrow comprising tax relief, loans and public infrastructure investment, bringing total stimulus to about 80 billion euros.
Moody’s Investors Service said on Feb. 17 it may cut the ratings of several banks with units in eastern Europe that are coming under “downward pressure,” citing weakening economies.
‘Solvency Difficulties’
Steinbrueck said this week he expects a number of nations in the euro region will experience funding problems. “Some countries are step by step approaching solvency difficulties,” he said in a speech on Feb. 16, declining to identify the nations to which he was referring.
Poland’s zloty has slumped 22 percent this year following a 17 percent loss in 2008, the largest since 1997. Hungary’s forint has weakened 21 percent in 2009 after a 9 percent decline in 2008. The zloty traded at 3.7887 per dollar from 3.8120 yesterday, and the forint was at 240.62 versus the greenback from 241.66.
Premiums on euro put options have risen to the highest in almost a month as the European currency trades near the lowest since November. One-month 25-delta risk reversals, which measure demand for calls and puts, show the cost on euro put options rose yesterday to 0.61 percent higher than the cost for euro calls, the most since Jan. 26. It was 0.52 percent today.
A put option gives its holder the right without obligation to sell an underlying asset, while a call option gives the holder the right to buy an asset. Risk reversals show the prices of a call option relative to a put option on the same currency.
Technical Charts
The dollar ended two days of gains versus the yen after a chart some traders use to predict price movements showed this week’s advance to a six-week high was overdone.
“The dollar-yen has been overbought,” said Ryohei Muramatsu, manager of Group Treasury Asia at Commerzbank AG in Tokyo. “It also has failed to breach resistance at 94, so there’s a likelihood that some players unwound long positions.”
The U.S. currency’s 14-day stochastic oscillator against the yen was 89, according to Bloomberg data. A level above 80 suggests a currency may have risen too quickly and is poised to decline. A long position is a bet an asset will rise.
U.S. Automakers
The dollar also weakened on speculation the largest U.S. automakers may fail unless they get increased government aid.
General Motors Corp. and Chrysler LLC, which are seeking as much as $21.6 billion in additional federal assistance, have a 70 percent likelihood of filing for bankruptcy, Moody’s Investors Service said yesterday. GM and Chrysler met a deadline yesterday requiring they show progress in revamping operations with $17.4 billion in loans granted so far.“The uncertainties about the big three automakers may weigh on the upside of the dollar,” said Takashi Kudo, director of foreign-exchange sales in Tokyo at NTT SmartTrade Inc., a unit of Nippon Telegraph and Telephone Corp. “If a Chapter 11 filing happens, the initial reaction should be a sell-off of the dollar.”
U.S. producer prices may have fallen 2.5 percent last month from a year earlier, according to a Bloomberg News survey before a Labor Department report today, signaling the world’s biggest economy may be heading for a period of sustained deflation. A separate Labor report tomorrow will show consumer prices dropped 0.1 percent in the 12 months to January, the first annual decline since 1955, according to another Bloomberg survey.
“The markets may begin to perceive that the U.S. economy will fare worse than those of other major countries,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “This is likely to be negative for the dollar.”
To contact the reporters on this story: Ron Harui in Singapore at rharui@bloomberg.net; Yasuhiko Seki in Tokyo at yseki5@bloomberg.net.
Last Updated: February 19, 2009 02:57 EST
Posts
0 comments:
Post a Comment