Euro rose sharply against the yen and dollar in Asia last Monday, because the series of the remarks from the European Central Bank shows that authorities had taken necessary measures for prompting non-Japanese hedge funds to buy the euro.
The dealers said that euro’s longer term prospects appear to be dim. On Monday, the ECB said that they will intervene in the eurozone’s public and private debt markets for ensuring depth and liquidity in those market segments that are dysfunctional. This remark came entered when the eurozone’s finance ministers created a EUR500 billion support plan for countries and additional funds of EUR250 billion will be provided by the International Monetary Fund.
Dealers said for reassuring investors about Greek debt issues, authorities have taken a quick move that prompted Non-Japanese hedge funds and Asian speculators to buy the euro.
A senior dealer at a major bank said that authorities had taken necessary safe measures which prevent the issue from getting worse in mean time.
European Union’s measures for protecting the eurozone from any potential spillover because of the Greece debt crisis are welcomed by the Group of 20 leading nations.
As of 0450 GMT, the euro was at Y119.70 compared with its low of Y117.78 in Asia and its New York level of Y116.43 late Friday. The euro stood at $1.2926 from its day’s low of $1.2790 and $1.2740 Friday. The pound rose to $1.4882 and Y137.86 from $1.4819 and Y135.45 late Friday. The Australian dollar gained to $0.9017 and Y83.55 from $0.8869 and Y81.05 Friday.
Dealers said that euro was gained also because of the news about the Federal Reserve’s reopening of a dollar-swap agreement with other central banks this measure is taken to restrain any critical bankruptcies. Chief economist at High frequency Economics, Carl Weinberg told that this agreement will help to prevent a credit crunch if the interbank money markets became liquid. Any how in near term the European single unit will not rise above Y121.00 and $1.3000, dealers told that the EU’s efforts may be wont solve the deep-rooted problems about the debt crisis in Greece. A senior manager of investment at Shinkin Asset Management, Jun Kato said that the currency market is having sense of security about the Greek debt crisis that may be it will spread elsewhere in Europe receding. He also included that any negative news about the debt problems will easily push down the euro.
Daisuke Karakama, senior market economist at Mizuho Corporate Bank said that euro will fall back toward Y110.00 and $1.2000 on longer term. For solving deep rooted Greek debt issues, nation needs more hard measures but that may be having negative impact on economic growth for a least near term. There is no need to buy the euro if the nation implements the financial reforms successfully.
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