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Business

Euro tumbles as confusion surrounds eurozone Greek solution

Text by News Wires

Latest update : 2010-03-24

Despite Germany stating for the first time that it may support a eurozone financial aid package for Athens, and possibly due to reports emerging of the IMF taking the lead in the rescue, the euro hit 10-month lows against the US dollar Wednesday.

REUTERS - The euro hit 10-month lows against the U.S. dollar on Wednesday as investors doubted a solution for Greece’s fiscal woes was on the cards, with the cautious mood holding Asian stocks below two-month highs.

Concerns around Greece’s fiscal problems returned despite Germany saying overnight for the first time it may support a euro-zone financial aid package for Athens.

Some analysts said Germany’s support, which was pegged to tough terms including help from the International Monetary Fund, made it unlikely European Union leaders would agree on a deal for Athens at a two-day summit starting on Thursday.

That tempered demand for riskier assets such as stocks and commodities, with Japan’s Nikkei backing away from a two-month high hit earlier in the day.

In Europe, gains in stocks may also prove tepid, with financial spreadbetters expecting Britain’s FTSE 100, Germany’s DAX and France’s CAC-40 to open by up to 0.3 percent higher.

“Be it the EU or the IMF, how either of them would rescue Greece remains uncertain. The euro looks set to trade defensively in the near term,” said Masafumi Yamamoto, chief currency strategist at Barclays Capital in Tokyo.

Anxiety over Greece could overshadow a raft of U.S. and European news out Wednesday, including Germany’s flash PMI, U.S. durable goods orders, and a pre-election UK budget.

The euro fell as far as to $1.3403 on trading platform EBS, its lowest since May 2009. It has fallen 6.3 percent so far this year, its worse performance since 2005 when it shed 12.7 percent.

Against the Swiss franc, the euro hit a record low of 1.4232 francs on EBS, fuelling talk among traders the Swiss National Bank may intervene in the market again to weaken its currency.

Against the Australian dollar, the euro slid to an all-time low of A$1.4621.

A firmer U.S. dollar dampened commodity prices, with oil down 68 cents at $81.23 a barrel. Gold erased earlier gains to be flat around $1,100.95.

A falling euro also boosted the yen and weighed on Japanese exporters. The benchmark Nikkei closed up 0.4 percent, paring a 1 percent rise earlier in the day.

Japan’s Canon Inc rose 1.6 percent, off a high of 2.7 percent hit earlier.

But Nintendo still managed to leap an impressive 8.5 percent on its plans to sell a new model of its DS handheld game gear, which allows users to play 3D games without special glasses.

Asian stock markets’ failure to rally despite U.S. stocks surging to 18-month highs overnight, underscored the extent of caution in markets, with the prospect of China possibly tightening policy also dragging on sentiment.

“There is too much concern about trade relations between China and the United States and appreciation of the yuan and a potential increase in interest rates in China,” said Marco Mak, research head at Tai Fook Securities in Hong Kong.

Hong Kong’s benchmark Hang Seng Index was up 0.4 percent, with turnover thin at HK$29.2 billion ($3.8 billion).

The MSCI index of Asia Pacific stocks outside Japan rose 0.26 percent, with charts showing resistance around the 61.8 percent Fibonacci retracement of its October 2007-November 2008 drop.
 

Date created : 2010-03-24

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  • FRANCE 24 INTERVIEW

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