The EU’s muted summit response to the Greek debt crisis depressed the euro in Asian trading yesterday as speculators bet on worse to come for the common currency.
EU leaders late on Thursday stopped short of offering bailout funds to rescue Greece, a eurozone member whose tattered government finances have highlighted the parlous debt of other crisis-hit countries such as Spain and Portugal.
The union’s 27 leaders vowed “determined and coordinated action if needed to safeguard the financial stability in the euro area as a whole” — a statement that Credit Agricole analyst Mitul Kotecha called a “disappointment.”
“The end result was a further sell-off in the euro, although equity markets showed a bit more resilience which prevented a sharper fall in [the] euro/dollar,” he said.
The euro slid to US$1.3669 in Tokyo afternoon trading from US$1.3695 in New York late on Thursday, and to ¥122.59 from ¥122.86.
Asian stock markets were generally higher, however, in quiet trading ahead of the Lunar New Year holidays.
Tokyo’s Nikkei-225 index closed up 1.29 percent, or 128.20 points, at 10,092.19.
Hong Kong shares fell 0.11 percent yesterday after earlier gains were eroded by a late bout of profit-taking ahead of the Lunar New Year holiday, dealers said. The benchmark Hang Seng Index slid 22 points to end at 20,268.69.
Chinese shares closed up 1.09 percent, led by metal and mining firms as investors expected commodity prices to remain strong during next week’s Lunar New Year holiday. The Shanghai Composite Index, which covers both A and B shares, rose 32.63 points to 3,018.13.
Australia’s S&P/ASX 200 ended 0.17 percent higher at 4,562.1, while gold prices rallied as investors turned more averse to risk because of the eurozone uncertainty.
Regional equity markets benefited from a Wall Street rally on Thursday fueled in part by better-than-expected US labor market data, showing initial jobless claims fell by 43,000 to 440,000 last week.
The labor report helped the US dollar, as did comments on Wednesday by US Federal Reserve Chairman Ben Bernanke mapping out an exit strategy from official stimulus support for the world’s largest economy.
Heaping pressure on the euro, according to brokers, are speculators building up “short” positions in anticipation of deeper falls for the single currency if Greece’s troubles spread further afield.
However, DBS Group said that despite the lack of details, the EU’s declaration should signal to the market that Germany, France and the rest of the bloc are determined to do “whatever it takes” to limit the Greek contagion.
“After reports that the market has amassed record short positions against the euro, the issue is no longer about Greece but speculation threatening the stability of the single market,” the Singaporean banking group said.
Richard Grace, chief currency strategist at Commonwealth Bank of Australia, said the euro’s troubles ran deeper than hedge funds and other speculators trying to make a quick buck.
Problems with sovereign debt have “been accompanied by a slowing in the pace of growth within the eurozone area, [contrasting with] rather impressive growth elsewhere, mainly in the US and Asia,” he said.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
Hong Kong authorities ramped up sales of the local dollar as the greenback’s slide threatened the foreign-exchange peg. The Hong Kong Monetary Authority (HKMA) sold a record HK$60.5 billion (US$7.8 billion) of the city’s currency, according to an alert sent on its Bloomberg page yesterday in Asia, after it tested the upper end of its trading band. That added to the HK$56.1 billion of sales versus the greenback since Friday. The rapid intervention signals efforts from the city’s authorities to limit the local currency’s moves within its HK$7.75 to HK$7.85 per US dollar trading band. Heavy sales of the local dollar by
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
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