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The euro fell against the dollar and yen in Asia Wednesday.
Written by article default Wednesday, 12 May 2010 09:42
Market OverviewThe euro fell against the dollar and yen in Asia Wednesday as falls in Chinese shares prodded U.S. and European hedge funds and Japanese interbank players to sell the risk-sensitive unit amid continued uncertainty over euro-zone debt problems.
The single currency may continue on its downward path in the days ahead, dealers said.
During the Asian session, non-Japanese hedge funds sold the risk-sensitive euro, using Chinese stock falls as an excuse to sell the unit, dealers said. The Shanghai Composite Index was down at 0.9%.
The euro fell one yen to JPY116.79 from its level in New York Tuesday. Against the dollar, the unit declined two-thirds of a cent to USD1.2620.
As of 0450 GMT, the U.S. dollar was slightly lower at JPY92.50, from JPY92.81 in New York late Tuesday. The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was at 84.868 from 84.512 Tuesday.
The U.K. pound is lower against major rivals, after the Conservative Party under Prime Minister David Cameron formed a new coalition government with the Liberal Democrats. The British pound traded with a soft bias on Tuesday initially in Asia and briefly dipped to USD1.4720 in Europe. However, the pair later rebounded from there and rose sharply to an intra-day high of USD1.5005 on optimism that Britain's Conservative party might be nearing an agreement to form a new coalition government with the Liberal Democrats.
The Australian dollar slipped a little during Asia trade Wednesday on lingering worries stemming from the Greek debt crisis, while bond futures drifted with little direction.
Market expectation
The euro and sterling are weaker against rivals Wednesday, while steady against each other, as each currency continues to have its own burden to bear.
Currency markets remain skittish, as the euro zone's rescue package has failed to convince investors that the sovereign debt crisis is over.
The single currency may continue on its downward path in the days ahead, dealers said.
Looking ahead, the European single unit could fall to USD1.2500 and JPY115.00 in the coming days, dealers said.
Market participants will keep their eyes on any development in the euro-zone debt issue. Their focus is also on whether China becomes more willing to let its currency, the yuan, appreciate in the short-term following a slightly higher-than-expected figure in China's consumer price index released Tuesday.
Analysts said the fragile tone in markets means the Australian dollar could be in for a period of weakness, especially as the U.S. dollar gains ground and domestic consumer confidence cracks under recent rate hikes.
European stocks are expected to open lower Wednesday, with negative sessions in the U.S. and Asian markets overnight adding pressure amid mounting skepticism towards the euro-zone bailout package.