By Paul Dobson and Yoshiaki Nohara
Japan’s currency slid the most against the euro in a month after a European Central Bank spokeswoman said President Jean- Claude Trichet will leave a meeting in Sydney early for a European Union summit. Australia’s dollar gained versus the greenback after Reserve Bank Governor Glenn Stevens warned that keeping interest rates too low for too long may hamper efforts by policy makers to prevent future asset bubbles.
“There’s increased speculation that support measures will be announced for Greece this week, and that’s triggering a relief rally,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “It’s put on a degree of support for risk assets because it would ease near-term sovereign-default fears.”
The euro rose 0.6 percent to $1.3728 at 7:28 a.m. in New York, from $1.3649 yesterday. The yen depreciated 1 percent to 123.11 versus the euro, from 121.81. It earlier slid 1.2 percent, the biggest intraday loss since Jan. 6. The yen declined 0.5 percent to 89.70 per dollar, from 89.26.
Europe’s single currency fell to $1.3586 on Feb. 5, the lowest level since May 20, as investors bet sovereign risk crises in nations such as Greece will force policy makers to keep interest rates at record lows longer. Credit-default swaps on the debt of Spain and Portugal rose to records yesterday. Contracts on Greece reached a record last week.
Trichet’s Itinerary
Trichet will depart today from a symposium marking the Reserve Bank of Australia’s 50th anniversary to attend this week’s gathering of EU leaders, an ECB spokeswoman, Regina Schueller, said.
EU President Herman Van Rompuy said yesterday in a letter to nations’ leaders that the summit will discuss “some aspects of the present economic situation,” without making a direct reference to Greece’s financial crisis. The focus of the meeting will be long-term economic strategy, he said.
Greece’s Finance Minister George Papaconstantinou said yesterday in a Bloomberg Television interview in Athens that calling for outside aid would be “the worst possible signal which we could send out.”
The euro may drop below 120 yen for the first time in a year as labor unrest in Greece stifles government efforts to tackle the widening budget deficit, said Hideki Hayashi, a global economist at Mizuho Financial Group Inc. in Tokyo.
‘Sickest Dog’
The currency looks like “the sickest dog in the litter,” Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney, wrote in an investor note.
Investors would be wrong to bet on a failure of the single currency because the EU has a commitment to manage the challenges of sovereign debt, European Commission President Jose Barroso told the European Parliament today in Strasbourg, France.
“The euro will continue to constitute a major tool for our development,” Barroso said. “Those who think it can be put into question must realize we will stick to our course. The European Union has the necessary framework to address all challenges that can appear.”
Australia’s dollar rose 0.8 percent to 87.15 U.S. cents and increased 1.4 percent to 78.28 yen after Stevens signaled he may increase borrowing costs, and as gains in Asian stocks revived demand for higher-yielding assets.
“If the root problem is simply that interest rates are too low, experience suggests that efforts to handle the problem by regulation aimed at constraining balance-sheet growth won’t work for long,” Stevens said in paper delivered at the Sydney meeting of central bankers.
The MSCI Asia Pacific Index and the Dow Jones Stoxx 600 Index of European shares added as much as 0.4 percent.
To contact the reporters on this story: Paul Dobson in London at pdobson2@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net
Last Updated: February 9, 2010 07:33 EST
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1 comments:
Thank you for all the great posts from last year! I look forward to reading your blog, because they are always full of information that I can put to use. Thank you again, and God bless you in 2010.
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