Euro falls on concern over debt issues
The euro fell from a six-month high against the dollar as concern about European nations’ sovereign debt reduced demand for the region’s assets.
The single currency dropped against 13 of its 16 major counterparts after the Financial Times reported Ireland’s budget deficit this year will be higher than earlier forecast, and Nobel Prize-winning economist Joseph Stiglitz said the euro’s future is “looking bleak.”
The yen halted a four-day gain versus the dollar on speculation the Bank of Japan will take additional credit-easing measures at its two-day meeting starting today.
The euro fell to $1.3751 at 8:02am in London from $1.3791 in New York at the end of last week, after rising to $1.3807 earlier today, the strongest level since March 17.
The euro was at 114.60 yen from 114.78 yen. The yen traded at 83.37 per dollar from 83.22, after earlier weakening to 83.87.
“There are ongoing worries over the fiscal and economic situation in the euro region,” said Neil Mellor, a currency strategist at Bank Of New York Mellon Corp in London. “Debt concerns may put paid to the recent euro rally.”
The Government’s budget figures due today are a result of a slowing economy rather than a reduction in tax receipts, the Financial Times said, citing unidentified officials.
The Government said on September 30 it is taking control of Allied Irish Banks and putting more money into the already nationalised Anglo Irish Bank, raising the cost of stabilising its financial system to as much as €50bn.
Stiglitz said the euro is under pressure because some countries such as Germany are running trade surpluses while Ireland, Portugal, Greece and others have deficits, according to the Sunday Telegraph.
The Bank of Japan begins a two-day policy meeting today in Tokyo at which policy makers are expected to discuss the need for additional measures to spur growth.
The Bank of Japan is expected to increase its 30-trillion yen (€263bn) credit program for lenders to encourage bank lending when the meeting ends tomorrow, 14 of 17 economists surveyed by Bloomberg News said. One economist forecasts the bank cut the overnight loan rate to zero from 0.1pc and buy more government bonds.
“Expectations that the BOJ will do something at its policy meeting are bolstering the equity markets,” said Shinichi Hayashi, a dealer in Tokyo at Shinkin Central Bank. “This may be leading to selling of the yen.”