Euro Dropped To Lowest Level In Almost Four Months Against Dollar
ICM Brokers | May 15, 2012 08:36AM ET
The euro dropped to its lowest level in almost four months against the dollar as a leadership vacuum in Greece prompted European officials to weigh prospects for the currency union’s first departure of a member state. The 17-nation currency slid for a second day versus the yen as Moody’s Investors Service cut the credit ratings of 26 Italian banks. The Dollar Index rose for an 11th day and the pound climbed to the highest versus the euro since 2008 as investors sought haven.
Australia’s currency fell below parity with the greenback for the first time this year, and Brazil’s real weakened to 2 per dollar for the first time since 2009.The Greek people want to stay inside the eurozone, but the government wants to renegotiate the fiscal pact. The euro fell 0.7 percent to $1.2823 in New York after sliding to $1.2821, the weakest level since January 18. The currency declined 0.8 percent to 102.39 yen and reached 102.23, the lowest since February 16. The yen gained 0.1 percent to 79.85 per dollar. The Italian banks downgraded included Unicredit SpA and Intesa Sanpaolo SpA. Moody’s cited weakened earnings and the country’s economic prospects.
GBP/USD
The British pound has become currency traders’ favorite refuge from the resurgent European debt crisis, threatening efforts by U.K. Prime Minister David Cameron to lift the economy out of its second recession in three years. Sterling has appreciated 4 percent this year, the most. Strategists have boosted their year-end forecasts for the pound against the euro by 3.6 percent in 2012, while options show investors are becoming more positive on the pound versus its 17-member European counterpart.
Bulls say the pound advanced since the end of October, even as the Bank of England flooded the financial system with sterling, is a sign the economy has bottomed. Bears say the gains may prove fleeting because the strong pound makes exports less competitive in the euro region, which buys about 47 percent of the U.K.’s overseas sales. The U.K. economic backdrop may not be brilliant, but it’s enjoying a haven status because of the political uncertainty in the eurozone.
USD/JPY
Get The News You Want
Japanese government bonds are the most expensive relative to the nation’s equities in at least six years as Europe’s deepening fiscal crisis bolsters investor demand for the relative safety of debt and strengthens the yen. Ten-year government notes yielded 1.68 percentage points less than the estimated dividend yield of companies in the Topix share index Monday. That’s the widest on record going back to 2006, and compares with 0.42 percentage point for a similar U.S. spread. Japan’s benchmark bond yield fell to the least in 19 months yesterday as concern Greece may exit the euro roiled global markets and prompted investors to pile into the nation’s debt as a haven.
The yen has risen 5 percent against the dollar from its year-low in March, weighing on the outlook of exporters such as Sony Corp., whose shares fell to its lowest price since 1980 last week. Demand for Japanese debt increased amid concern resistance to austerity measures will cause Greece to become the first nation to exit the 17-nation euro bloc. The country’s political deadlock looked set to continue for a second week as President Karolos Papoulias failed to form a unity government after its inconclusive voting last week. The Topix Index lost 13 percent to 756.68 since this year’s high on March 27, as the impact of the Bank of Japan’s stimulus measures tapered off.
The dividend yield on the equity index has risen 40 basis points, or 0.4 percentage points, to 2.53 percent during the same period. The BOJ unexpectedly expanded its government bond purchases by 10 trillion yen and set an inflation goal of 1 percent on February 14. In April, the central bank boosted its buying program by another 10 trillion yen and extended the maximum maturity of the bonds it purchases to three years.
USD/CAD
Canada’s dollar rose against most of its major counterparts on speculation North American economic growth will outpace other regions’ as the failure of Greece to form a government spurs risk aversion. The Canadian currency was up 0.7 percent in the past week, rising with haven currencies the yen and U.S. dollar, amid concern Greece may be the first member state to exit the euro. Employment climbed almost six times more than economists forecast, Statistics Canada said last week, fueling bets the central bank will be the first in the Group of Seven nations to raise interest rates.
Canada’s currency, nicknamed the loonie, rose against all but four of its 16 major counterparts. It dropped 0.3 percent to CAD 1.0037 per U.S. dollar in Toronto. The loonie has traded within a three-cent range versus the greenback since the end of January, sliding to CAD 1.0063 on May 9 and strengthening to 98 cents on April 27. It will trade at 98 cents at year-end, according to a forecast.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.