The dollar reached a two-month high against the euro before three European nations and the region’s bailout fund sell bills amid concernStandard & Poor’s may cut sovereign credit ratings in the common currency area.
The greenback strengthened versus most of its 16 major counterparts after Fitch Ratings and Moody’s Investors Service said yesterday that a European Union summit last week offered little help in ending the region’s debt crisis. The yen touched a two-week high against the euro before a German report today that may show investor confidence in Europe’s largest economy slid to a three-year low, boosting demand for safer assets.
“The ratings agencies are reminding us of sovereign downgrade risk” in Europe, said Sacha Tihanyi, a Hong Kong-based currency strategist at Scotia Capital, the investment banking unit of Bank of Nova Scotia. “The dollar will have no choice but to find support on the back of euro weakness.”
The dollar touched $1.3161 per euro, the strongest since Oct. 4, before trading at $1.3181 as of 10:17 a.m. in Tokyo from $1.3187 in New York yesterday. The euro bought 102.72 yen from 102.76, after earlier reaching 102.60, the least since Nov. 25. The U.S. currency was unchanged at 77.94 yen.
The MSCI Asia Pacific Index (MXAP) of shares lost 1.1 percent, prompting investors to seek a haven.
Bill Auctions
The European Financial Stability Facility, the EU’s bailout fund, will auction as much as 2 billion euros ($2.6 billion) of 91-day bills today. Greece will sell 1.25 billion euros of 182- day bills, Belgium will offer 1.2 billion euros of short-term debt and Spain will auction 364-day and 553-day bills.
S&P said on Dec. 6 the EFSF may lose its top credit rating if any of the fund’s six guarantors face a downgrade from AAA. The rating company may cut the debt grade of 15 euro nations, including Germany and France depending on the outcome of an EU summit on Dec. 9, S&P said separately last week.
European leaders unveiled a blueprint after meetings on Dec. 8 and 9 for a closer fiscal accord, adding 200 billion euros to their bailout fund and tightening rules to curb future debts. They also said they would start a 500 billion-euro rescue fund next year.
The EU summit offered few new measures and doesn’t diminish the risk of credit downgrades on European nations, Moody’s said. Fitch said separately that a comprehensive solution has not yet been offered and predicted a “significant economic downturn” in the region.
“People in the market are nervous about a result of S&P’s review on the summit,” said Koji Iwata, vice president in New York of Mizuho Corporate Bank Ltd., a unit of Japan’s third- biggest banking group by market value. “People are trying to push euro lower because of that caution.”
The ZEW Center for European Economic Research may say its index of German investor and analyst expectations, which aims to predict developments six months in advance, declined to minus 55.8 in December, according to the median estimate in a Bloomberg News survey of economists. That would be the lowest reading since October 2008.
(source: Bloomberg)
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13/12/2011 09:01:20 AM | 