Euro falls to 14-month low as credit crisis spreads to Europe
Tuesday, 7 October 2008
LONDON, Oct 6 (Bloomberg): The euro had its biggest one-day drop against the yen in nine years as the deepening credit crisis prompted European governments to pledge bailouts for troubled banks while stopping short of coordinated action.
The 15-nation currency declined to a 14-month low against the dollar and the weakest in 2 1/2 years versus the yen after leaders meeting at the weekend avoided announcing any plan that would mirror the US's $700 billion bailout. Germany joined with banks and insurers to prevent the collapse of property lender Hypo Real Estate Holding AG and Belgium announced a revised deal to salvage Fortis. The yen jumped 5 per cent versus the Australian dollar as investors cut holdings of higher- yielding assets funded in Japan, known as carry trades.
The euro fell to 139.96 yen, the weakest since March 2006 and its biggest drop since September 9, 1999, before trading at 140.19 as of 6:17 am in New York, from 145.11 on October 3. The euro declined to $1.3585, from $1.3772. It earlier reached $1.3543, the lowest since August 23, 2007. The dollar bought 103.18 yen, from 105.32, after earlier sliding below 103 for the first time in four months. The euro may fall to $1.3360 and below 137 against the yen this week, Stannard said.
Against the pound, the euro fell to 77.02 pence, the lowest since March 14. It also declined to 1.5379 Swiss francs, the weakest in more than six months.
The German government and the country's banks and insurers agreed on a 50 billion-euro ($68 billion) rescue for Hypo Real Estate after an earlier bailout faltered. BNP Paribas SA, France's biggest bank, agreed to take over Fortis's units in Belgium after a government rescue failed.
HSBC Holdings Plc cut its forecast for European growth next year to 0.4 per cent from a previous prediction of a 0.9 per cent, economists led by Janet Henry wrote in a note to clients dated October 3. UBS AG cut its outlook for expansion in Asia excluding Japan next year to 6.1 per cent from 6.9 per cent.
The yen rose to 76.56 per Australian dollar, the highest since September 17, 2004. It advanced to 66.63 versus the New Zealand dollar from 69.68 and to 50.4992 against the Brazilian real from 51.5240.
Japan's currency was the best performer in September and the only currency to appreciate against the dollar as a credit- market collapse drove Lehman Brothers Holdings Inc. into bankruptcy and sent borrowing costs in Europe to record highs.
Futures traders increased their bets that the yen will gain against the US dollar, figures from the Washington-based Commodity Futures Trading Commission show.
The difference in the number of wagers by hedge funds and other large speculators on an advance in the yen compared with those on a drop, so-called net longs, was 43,022 on September 30, compared with net longs of 31,939 a week earlier.
The dollar fell for a fourth day against the yen on speculation reports will show a deepening slump in the US economy. Pending home sales fell 1.1 per cent in August after a 3.2 per cent decline in the previous month, according to a Bloomberg News survey. The National Association of Realtors will release the data on October 8.
Technical analysis shows the euro may fall to $1.3380 this week, said Kengo Suzuki, currency strategist at Shinko Securities Co. in Tokyo.
The European currency is likely to extend last week's 5.8 per cent loss as its daily moving average convergence/divergence chart is showing a sell signal, according to Suzuki. Support at $1.3380 is near the euro's 200-week moving average, he said. Support is a level where buy orders may be clustered.
The 15-nation currency declined to a 14-month low against the dollar and the weakest in 2 1/2 years versus the yen after leaders meeting at the weekend avoided announcing any plan that would mirror the US's $700 billion bailout. Germany joined with banks and insurers to prevent the collapse of property lender Hypo Real Estate Holding AG and Belgium announced a revised deal to salvage Fortis. The yen jumped 5 per cent versus the Australian dollar as investors cut holdings of higher- yielding assets funded in Japan, known as carry trades.
The euro fell to 139.96 yen, the weakest since March 2006 and its biggest drop since September 9, 1999, before trading at 140.19 as of 6:17 am in New York, from 145.11 on October 3. The euro declined to $1.3585, from $1.3772. It earlier reached $1.3543, the lowest since August 23, 2007. The dollar bought 103.18 yen, from 105.32, after earlier sliding below 103 for the first time in four months. The euro may fall to $1.3360 and below 137 against the yen this week, Stannard said.
Against the pound, the euro fell to 77.02 pence, the lowest since March 14. It also declined to 1.5379 Swiss francs, the weakest in more than six months.
The German government and the country's banks and insurers agreed on a 50 billion-euro ($68 billion) rescue for Hypo Real Estate after an earlier bailout faltered. BNP Paribas SA, France's biggest bank, agreed to take over Fortis's units in Belgium after a government rescue failed.
HSBC Holdings Plc cut its forecast for European growth next year to 0.4 per cent from a previous prediction of a 0.9 per cent, economists led by Janet Henry wrote in a note to clients dated October 3. UBS AG cut its outlook for expansion in Asia excluding Japan next year to 6.1 per cent from 6.9 per cent.
The yen rose to 76.56 per Australian dollar, the highest since September 17, 2004. It advanced to 66.63 versus the New Zealand dollar from 69.68 and to 50.4992 against the Brazilian real from 51.5240.
Japan's currency was the best performer in September and the only currency to appreciate against the dollar as a credit- market collapse drove Lehman Brothers Holdings Inc. into bankruptcy and sent borrowing costs in Europe to record highs.
Futures traders increased their bets that the yen will gain against the US dollar, figures from the Washington-based Commodity Futures Trading Commission show.
The difference in the number of wagers by hedge funds and other large speculators on an advance in the yen compared with those on a drop, so-called net longs, was 43,022 on September 30, compared with net longs of 31,939 a week earlier.
The dollar fell for a fourth day against the yen on speculation reports will show a deepening slump in the US economy. Pending home sales fell 1.1 per cent in August after a 3.2 per cent decline in the previous month, according to a Bloomberg News survey. The National Association of Realtors will release the data on October 8.
Technical analysis shows the euro may fall to $1.3380 this week, said Kengo Suzuki, currency strategist at Shinko Securities Co. in Tokyo.
The European currency is likely to extend last week's 5.8 per cent loss as its daily moving average convergence/divergence chart is showing a sell signal, according to Suzuki. Support at $1.3380 is near the euro's 200-week moving average, he said. Support is a level where buy orders may be clustered.