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The euro rose against the dollar in Asia Thursday.
Written by article default Thursday, 13 May 2010 11:12
Market OverviewThe euro rose against the dollar in Asia Thursday as some Asian hedge funds bought the unit on the view it won't likely fall sharply for now because Europe's fiscal problems won't worsen much in the near term.
These hedge funds speculated that the EUR750 billion bailout plan created Monday may contain investors' concerns that Greece could default, at least for now.
As of 0450 GMT, the euro rose to USD1.2667 from USD1.2629 in New York Wednesday, and increased to JPY118.00 from JPY117.69.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 84.641, down from 84.848.
Euro weakened to an intra-day low of USD1.2605 in Asian afternoon but then rebounded strongly to USD1.2740 on active short-covering after news that European central banks were buying Portugal, Ireland and Greece government bonds and Spain announced more spending cuts. Euro then retreated from said USD1.2740 high and traded with a soft bias in NY afternoon.
In the U.K., Bank of England Governor Mervyn King's comments about the huge deficit challenge facing the U.K. have helped undercut the pound, while investors also are looking for details of the new coalition government's debt-cutting plan.
The Australian dollar rose in Asia trade Thursday, helped by another robust report on the Australian labor market.
Market expectation
European stock markets are expected to open higher Thursday, with healthy overnight sessions in the U.S. and Asia offering support as announcements from Spain and Portugal on the implementation of austerity measures buoy global sentiment, increasing investors' appetite for risk.
Euro was nudging higher Thursday yet traders remained cautious about its prospects, saying many unanswered questions remained about debt reduction and economic growth. There aren't many players who believe the euro will keep rising, dealers said.
For now, the dollar will be capped at the JPY95 mark, a big and important psychological level, said analysts.
Players should be cautious about sudden big jump which could be triggered by single trade's magnified impact. Adds for longer-term, pair likely to keep rising, but some, strategist say that heavy cap at JPY95 as pair has been unable to rise above that line recently.
The U.K. pound will continue to face headwinds as the new government will have to present a credible budget in order to avoid its sovereign debt losing its triple-A status granted by ratings agencies, analysts said.