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December 29th, 2011
FOREX-The euro tumbled to its lowest level against the dollar since September 2010 in thin European trading Thursday after Italy’s final bond auctions of 2011 proved less than outstanding and year-end flows continued to support the dollar.
The single currency fell to $1.2858 against the dollar, extending Wednesday’s declines, while it also took a hit against the safe-haven Swiss franc and yen, falling to a fresh 10-year low against the Japanese currency.
Italy’s cost of borrowing fell slightly but the Italian Treasury only managed to sell EUR7.017 billion out of a maximum EUR8.5 billion, disappointing some market participants who had hoped for a repeat performance of yesterday’s super-successful short-term debt auction, where six-month borrowing costs were halved.
“If you look at a like-for-like comparison with the previous auction in November you get better yields, but it’s still expensive and they did not allot the full amount. So overall it’s a pretty bad auction, so that’s why the euro is falling,” said Chris Walker, currency strategist at UBS AG in London.
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December 9th, 2011
FOREX-The euro was marginally higher Friday as European Union leaders ended two days of talks on the future of the common currency with an agreement to introduce tougher fiscal rules for the 17 euro-zone nations.
“There was some increase in risk appetite because the leaders came up with something and at least made some progress,” said David Watt, senior currency strategist at RBC Capital Markets in Toronto. “If the market decides to look for details, there might be some disappointment next week.”
The leaders promised to increase the financial backstops to countries with debt problems by channelling EUR200 billion of funds to the International Monetary Fund. However, they put off until March a decision on a proposal to lift the EUR500 billion cap on the funds available to the European Stability Mechanism.
It also remains to be seen if the deal agreed upon Friday will convince the European Central Bank to intervene more forcefully in the sovereign bond market. ECB President Mario Draghi Thursday sent a very clear message that he would not, dashing market expectations that the ECB would step up its bond purchases once a convincing political solution to the crisis was in place.
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December 6th, 2011
FOREX – The euro was little changed Tuesday, as investors anticipated that Friday’s European Union summit might yield a breakthrough on the Continent’s debt crisis, even as Standard & Poor’s warned that many of the sovereign credit ratings within the 17-nation currency bloc were being jeopardized by mounting financial and political turmoil.
Late Monday, S&P placed the ratings of 15 euro-zone nations on negative credit watch, signaling there was a 50% chance of a downgrade within 90 days if policymakers are unable to craft a solution to the debt crisis causing upheaval across global markets.
In a move that jolted investors, the firm singled out several members of Europe’s triple-A club, including Germany and France – the euro zone’s two largest and most stable economies. On Tuesday, the firm warned that in the event of a member nation’s downgrade, Europe’s newly-inaugurated bailout fund could also see its AAA-rating marked down.
The announcement comes at a delicate time. Markets are largely in stasis ahead of a pivotal EU meeting, where officials are expected to offer policy changes to sanction fiscally-wayward members. European officials are also said to be negotiating an increase in the bloc’s bailout fund, which analysts say is insufficient to prevent the growing possibility that Italy and Spain could be shut out of capital markets.
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December 2nd, 2011
FOREX-The weight of Europe’s debt problems hampered the euro Friday, which shed more than a cent intraday as investors became cautious ahead of a critical European Union summit next week.
With speculation mounting that the International Monetary Fund may need to commit its resources to contain the euro zone’s crisis, the euro rose on early reports that the European Central Bank could lend as much as $270 billion to the fund. The news helped spark a rally that was helped by news that the U.S. unemployment rate fell sharply in November.
But the common currency fell anew as doubts set in about whether even that sum would be sufficient to stem contagion from Europe. Over the last week, borrowing costs of Italy and Spain have fallen, yet hover uncomfortably near levels that economists think are unsustainable.
Meanwhile, skepticism continues to dog Europe’s newly-created bailout facility, which analysts say has not attracted nearly enough capital to manage the Continent’s growing debt woes by itself. Markets are looking for the ECB adopt a more aggressive stance, yet they appear reluctant to do so unless EU leaders can forge broad-based agreement on new fiscal rules at next week’s high-stakes meeting.
Even if the IMF helps Europe, traders wonder “what’s the ECB going to come to the party with?” asked Ray Attrill, senior currency analyst at BNP Paribas. “If Europeans deliver on a fiscal compact, then certainly the ECB will be inclined to be supportive of bond markets,” he added.
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December 1st, 2011
FOREX – The euro was marginally firmer during a quiet European session Friday as French and German political leaders suggested they share common ground on forging a closer euro-area fiscal unity.
However, it traded within a tight range as investors held onto positions ahead of important employment data from the U.S.
The euro briefly touched session highs of $1.3492 against the dollar, but quickly returned to tight range trading. The single currency also printed session highs against the Swiss franc, while European stocks stormed higher and peripheral bond yields eased.
There was, however, little market reaction to comments made by German Chancellor Angela Merkel to German lawmakers earlier in the session. Speaking after French President Nicolas Sarkozy had Thursday pledged a raft of reforms and threw his weight behind efforts to set up a fiscal union, Merkel made an urgent appeal for decisive political action to fix the root of the euro-zone debt crisis. But markets were broadly unmoved and instead were positioned ahead of the November non-farm payrolls report.
“Non-farm payrolls will provide a welcome distraction from the euro-zone fundamentals,” said Ian Stannard, head of European foreign exchange strategy at Morgan Stanley.
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November 30th, 2011
FOREX – The euro struggled for a direction Wednesday in Asia as euro-zone finance ministers agreed on details to expand the bloc’s bailout fund but acknowledged it would have less capacity to help troubled nations than once hoped.
The ministers approved two measures for increasing the firepower of the European Financial Stability Facility, the bloc’s bailout fund.
Under one measure, the EFSF would fund so-called “protection certificates” to be attached to new bonds issued by troubled euro-zone countries. The certificates would entitle holders to claim 20% to 30% of the bond’s face value in case of default.
“The meeting was closely watched, but nothing really fresh came out,” Atsushi Hirano, head of FX sales in Japan at the Royal Bank of Scotland, said, adding that the EFSF development was “a small positive.”
The single currency was also supported by expectations of a potential Italy bailout, dealers said.
Talks may start next month on a EUR400 billion package for Italy, with the International Monetary Fund standing ready to provide EUR100 billion, if the euro-zone bailout fund and European central banks can provide another EUR300 billion, senior euro-zone and IMF officials said late Tuesday.
The hurdle for the ECB to chip in looks high, said a senior dealer at a Japanese bank, “but if the ECB shifts away from a cautious stance to give more funds, that could boost the euro in the short term.”
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November 29th, 2011
FOREX – The euro held onto its modest gains against the dollar and the yen in Asia Tuesday, with optimism toward the eurozone debt crisis and position-squaring giving temporary support to the single currency.
Traders are focusing on a two-meeting of European finance ministers starting later in the day to see if they can flesh out plans to leverage the European Financial Stability Facility, the region’s bailout fund.
In late October, euro-zone leaders agreed to leverage the EUR440-billion EFSF to EUR1 trillion as part of a comprehensive agreement to resolve the debt crisis.
“I’m wondering if we should hold out too much hope for this sort of meeting, as the outcome mostly failed to live up to expectations in the past,” said Dai Sato, senior vice president of the foreign exchange division at Mizuho Corporate Bank.
At 0450 GMT, the euro was at $1.3342 from $1.3320 in late New York trade Monday, according to EBS via CQG. It was at Y104.19 from Y103.84.
Barclays Capital chief currency strategist Masafumi Yamamoto echoed skepticism over the meeting, saying Europe’s debt problems aren’t improving at all and aren’t something that can be solved by a gathering of leaders alone. “There is a high chance the current market optimism toward the meeting will turn to disappointment soon,” he said.
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November 28th, 2011
Forex – The euro gave up much of its gains made earlier Monday in Asia, as doubts emerged over a report that the International Monetary Fund may offer financial support to Italy.
The euro rose earlier in the day on expectations for bolder action from the international community to fix the euro-zone crisis.
A daily newspaper in the Italian city of Turin cited IMF sources Sunday as saying the fund could offer Italy between EUR400 billion and EUR600 billion in financial support. That would give Italian Prime Minister Mario Monti a window of 12 to 18 months to enact reforms to restore waning market confidence in Italy’s ability to repay its debt.
However, people familiar with international discussions on the European debt crisis told Dow Jones Newswires on Monday that the report wasn’t credible.
“I think it is baseless,” one of them said. “There has been no talk on something like that among (Group of Seven) authorities.”
The euro lost nearly 50 pips versus the dollar within a few minutes after the Dow Jones headlines hit the wire.
“We knew the euro was going to fluctuate based on headlines like these,” said Tomohiro Nishida, senior dealer at Chuo Mitsui Trust and Banking.
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November 25th, 2011
Forex- The euro fell to a fresh seven-week low versus the dollar Friday in Asia as continuing uncertainty over the European sovereign debt crisis kept investors in risk-averse mode.
Stocks fell in most Asian markets Friday with the Nikkei Stock Average closing at its lowest level since March 2009 and European sovereign yields maintaining elevated levels. Among them, the 10-year Italian yield stayed above the key 7.0% mark.
Leaders of the euro zone’s three largest economies pledged Thursday to propose modifications to European Union treaties to further integrate economic policy and crack down on profligate spenders. But there are no signs of a shift in German Chancellor Angela Merkel’s reluctant stance regarding a more ambitious approach for the European Central Bank in addressing the crisis, which French officials have called for.
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November 23rd, 2011
Forex-The euro sank to a six-week low against the dollar in European trade Wednesday as news broke of a poor German government bond auction and after the Bank of Greece warned the country risked exiting the euro zone, reinforcing an already gloomy tone as weak data helped to fan European recession fears.
Trading was cautious in Asian hours after weak Chinese manufacturing data and after a newspaper reported that the bailout plan to save Franco-Belgian bank Dexia SA (DEXB.BT) isn’t viable in its current form, suggesting the French government would have to shoulder a bigger share of the burden.
But the euro then plummeted across the board after Germany offered EUR6 billion of new 10-year benchmark bunds but only managed to sell EUR3.6 billion, prompting investors to worry that the euro-zone debt crisis might even be spreading to its hitherto solid German core.
“I cannot recall a worse auction,” said Marc Ostwald, a rates strategist at Monument Securities in London. “If Germany can only manage this sort of participation, what hope for the rest?”
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