Bourse

Home page

Bourse

Euro plunges to new low

19 January 2010 09:10 (UTC +04:00)

Baku-APA-Economics. The euro fell to a four-month low against sterling on Tuesday but signs that China is stepping up quantitative tightening helped it recover from a two-year trough versus the Aussie, with investors trimming positions in riskier assets such as growth-linked currencies, Reuters reported.
Sterling hit a six-week high against the dollar, drawing strength after reports that U.S.-based Kraft Foods Inc and Britain’s Cadbury Plc were arranging a $19 billion deal to create the world’s largest confectionery group, traders said.
The result of a bill auction by the Chinese central bank sparked renewed worries over a stepping up of tightening, traders said.
The move came after China’s surprise increase of banks’ required reserves last week, which was the strongest step to date by the central bank as it starts to normalise monetary policy from very loose conditions.
"The latest move reflects China’s strong intention to rein in real estate bubbles," said Hideki Amikura, deputy general manager of the forex section at Nomura Trust Bank.
"The action itself is not necessarily negative for growth, but Asian stocks, especially Australian shares, are reacting sensitively to the move due to their strong economic ties and their recent gains have been heavily capped," said Amikura.
He added that struggling Asian shares were denting the Australian dollar.
At a meeting of eurozone finance ministers on Monday, Greece received the group’s backing in tackling its debt troubles, even as they pressed the country to do more on its own..
The news on Greece was enough to help the single currency edge up 0.1 percent to $1.4395, pulling away from $1.4335 hit on Monday on trading platform EBS.
Greece’s ballooning budget deficit and debt of more than 120 percent of gross domestic product has triggered downgrades by debt rating agencies and hurt the euro in the past few months.
The euro earlier fell against the Australian dollar near an over two-year low of A$1.5496 struck the previous day but rebounded later to trade up 0.3 percent at A$1.5571.
The euro dropped to a four-month low of 87.63 pence, down about 0.5 percent on the day, with support seen around 87.41 pence. Charts indicate a daily close below there would generate a bearish long-term trend reversal targeting 85.20 and eventually 84.54.
The pound rose to a six-week high of $1.6422, supported by firmer UK housing data and speculation of more M&A-related inflows.
The Aussie dollar fell 0.2 percent to $0.9242, and dropped 0.5 percent to 83.60 yen.
The dollar index, a gauge of the greenback’s performance against six other major currencies, was down slightly at 77.001.
The dollar was 0.3 percent down at 90.50 yen, hovering at four-week lows. Japan Airlines is expected to file for bankruptcy later in the day, and traders speculated that could lead to some yen repatriation.
Market participants have speculated the company may have to liquidate some of its dollar-buying derivative contracts or repatriate overseas assets after a possible bankruptcy filing.