Bloomberg | Jul 23, 2010
The euro slumped against the dollar after a draft document said the 91 banks being stress-tested were only examined on European sovereign debt losses for the bonds they trade, rather than those they hold to maturity. “If that’s the case, that would be a huge disappointment,” said Kathy Lien, director of currency research, with online-currency trader GFT Forex in New York. “In order to restore investor confidence it needed to look at the entire balance sheets of these banks.” The yen fell versus the dollar as Japanese policy makers for a third straight day signaled that a stronger currency poses a danger to growth, spurring speculation they will take steps to counter that risk. The euro rose earlier as Germany’s IFO institute said its business climate index jumped to 106.2, the highest level since July 2007. Hungary’s forint snapped a three- day gain as Moody’s Investors Service said it may reduce the nation’s credit rating. The 16-nation European currency fell 0.4 percent to $1.2837 at 9:47 a.m. in New York, from $1.2893 yesterday. The yen weakened 0.5 percent 87.35 per dollar from 86.95 yesterday. “It’s mostly a funding switch and people betting on the funding switch and being disappointed right now,” said Sebastien Galy, a currency strategist at BNP Paribas SA in New York.
Regulators are scrutinizing European banks to assess if they have enough capital, defined as a Tier 1 capital ratio of at least 6 percent, to withstand a recession and sovereign debt crisis, according to a document from the Committee of European Banking Supervisors. Lenders that fail the trials will be made to raise additional capital. The results will be published by CEBS and national regulators starting at 6 p.m. Brussels time. “The haircuts are applied to the trading book portfolios only, as no default assumption was considered,” according to a confidential document dated July 22 and titled “EU Stress Test Exercise: Key Messages on Methodological Issues.” The tests will assume a loss of 23.1 percent on Greek debt, 14 percent of Portuguese bonds, 12.3 percent on Spanish debt, and 4.7 percent on German state debt, according to the document obtained by Bloomberg News. U.K. government bonds will be subject to a 10 percent haircut, and France 5.9 percent.
Bloomberg | Jul 6, 2010
The most accurate foreign-exchange forecaster says the euro will continue to weaken and may approach parity with the dollar as the European Central Bank buys more government bonds to support the region’s economy. Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto, said the euro will depreciate to $1.13 in the third quarter, $1.08 by year-end and may near $1 in 2011 before recovering. Osborne, whose predictions were within 4.1 percent of the mark on average, according to data compiled by Bloomberg, was echoed by the nine following most-accurate forecasters in anticipating a lower euro in the next two quarters. The euro weakened 15 percent against the dollar in the first half on speculation record budget deficits from Ireland to Portugal and Greece will force governments to cut spending and reduce economic growth. Bond yields among the euro-area’s so- called peripheral nations surged relative to German bunds even as European Union leaders crafted an almost $1 trillion aid package to avoid sovereign defaults.
“It’s going to be an immensely challenging environment for these economies to try and regain competitiveness internally within the euro zone,” said Osborne, 47, who has been head of currency strategy at TD Securities since he joined in 2006 from Scotia Capital. His colleague Jacqui Douglas in Toronto assists in formulating forecasts. “The ECB is moving towards its version of quantitative easing. It suggests they’re going to be very late now to the tightening cycle.” The currency, shared by 16 European nations, rose 0.8 percent to $1.2644 as of 10:49 a.m. in New York. It has gained 6.5 percent since hitting a more than four-year low of $1.1877 on June 7, after falling from 2009’s high of $1.5144 on Nov. 25.
The ECB began buying government bonds from some member nations on May 10, part of the EU rescue package, to cap yields and underpin the euro. The decline threatens to break up the region, former Federal Reserve Chairman Paul Volcker said in May, while central banks are putting more of their reserves into currencies other than the euro, data from the International Monetary Fund show. “Reserve diversification, one of the drivers behind
Reuters | Fri May 14, 2010 | 5:17pm IST
The euro hit an 18-month low versus the dollar and European shares fell sharply on Friday on speculation that fiscal austerity in some euro zone countries may stifle economic growth. High-risk assets including stocks took a hit and worries about the euro zone debt crisis prompted demand for safer investments, pushing gold to a record high while the dollar hit its strongest versus a currency basket in a year. European authorities announced a massive debt safety net for Greece, Spain and Portugal this week, but investors remain sceptical whether those countries can take the pain of overhauling their poor public finances. Such uncertainty drove the euro as low as $1.2433 according to Reuters data, its weakest since November 2008, having broken through options barriers at $1.2500 and $1.2450.
Gold prices, which often climb in times of risk aversion, soared to a record high of $1,248.95, while the yellow metal priced in euros, sterling and Swiss francs also hit its strongest ever. "The uncertainty brought about by sovereign risk is pushing markets lower," said Nick Parsons, head of markets strategy at nabCapital. "Until we get clarity about whether austerity measures can be implemented, risk markets will head lower." Such uncertainty pushed the MSCI world equity index down 1 percent, while the FTSEurofirst 300 index fell 2.0 percent. U.S. stock futures pointed to a lower opening on Wall Street.
Bloomberg | March 29, 2010 | 10:44 EDT
The strengthening US. economy, subdued inflation and rising stock prices are propelling the dollar rally into its fifth month as traders seek refuge from Europe’s fiscal crisis and Japanese deflation. Goldman Sachs Group Inc. and Citigroup Inc. ended bets on a falling dollar last week after the trades lost 2.8 percent. Strategists are raising greenback forecasts at the fastest pace since last March, just before US stimulus efforts that poured as much as $12.8 trillion into the economy ended the currency’s strongest rally in 28 years. Median predictions for the dollar against 47 currencies tracked in Bloomberg surveys rose an average of 1.4 percentage points in the month to March 24. A year after correctly predicting the currency’s decline and likening it to the fall of Rome, Royal Bank of Scotland Group Plc’s Alan Ruskin said it may soar 22 percent to $1.10 per euro if Greece defaults.
“We’ve moved away from the worst fears,” said Ruskin, the head of currency strategy for RBS Capital Markets in Stamford, Connecticut. “In the US, the economy picked itself up off the ground,” he said in an interview. “Compared to what it might have looked like from the view of March 2009, March 2010 looks very good.” The US Labor Department will report on April 2 that 190,000 jobs were created this month, the most in three years, according to the median estimate of 62 economists surveyed by Bloomberg. The Standard & Poor’s 500 Index has gained 5.6 percent in March, and the latest report on consumer prices showed the cost of living was unchanged in February, ensuring inflation won’t cut off the recovery.
Consumer prices in Japan, meanwhile, fell for a 12th month in February, the government reported March 26. The Organization for Economic Cooperation and Development said the same day that the nation’s potential growth rate between 2011 and 2017 will be the lowest among Group of Seven at 0.9 percent. Leaders of the 16-nation euro region sought International Monetary Fund help to respond to Greece’s budget crisis. Portugal’s credit rating was cut one step by Fitch Ratings to AA- with a “negative”