Wednesday 21 March 2018

Euro falls to four-year low

Euro: German ban on some speculative sales. Photo: Bloomberg News
Euro: German ban on some speculative sales. Photo: Bloomberg News

Candice Zachariahs and Ron Harui

The euro weakened for a second day to the lowest level in more than four years as Germany’s ban on some speculative sales triggered concern Europe’s debt crisis will worsen.

The euro slid to its least since April 2006 after Germany prohibited naked short-selling and speculating on European government bonds with credit-default swaps, and the Bank of Italy allowed lenders to exclude losses on government debt.

New Zealand’s dollar dropped a fourth day as central bank Governor Alan Bollard said a gradual currency depreciation was desirable. Australia’s dollar slumped to an eight-month low.

“If you don’t feel like you can sell bonds and equities in Europe, you’re left with selling the euro to express a negative view,” said Greg Gibbs, a foreign-exchange strategist at Royal Bank of Scotland in Sydney.

The German ban “creates a view that the authorities sense bigger problems than what may appear on the surface, creating more nervousness and fear.”

The euro fell to as low as $1.2144, the weakest since April 17, 2006, before trading at $1.2167 as of 9:54am in Tokyo from $1.2202 yesterday in New York.

Europe’s currency declined 1pc to 111.47 yen. The dollar rose to $1.4256 per pound from $1.4334, after earlier touching $1.4248, the strongest since March 31, 2009.

The yen advanced to 91.65 per dollar from 92.23 yesterday, after reaching 91.62, the highest level since May 7.

New Zealand’s currency fell to 68.42 U.S. cents, the weakest since February 9, before trading at 68.47 cents from 69.41 cents yesterday.

The German ban, which lasts until March 31, 2011, also applies to the shares of 10 banks and insurers including Allianz SE and Deutsche Bank AG, financial regulator BaFin said late yesterday in an emailed statement.

The step was needed because of “exceptional volatility” in euro-area bonds, BaFin said.

The Australian dollar dropped to the lowest since September as concerns about Europe’s debt crisis and a possible slowdown in China undermined investor and consumer confidence in the South Pacific nation’s economy.

The so-called Aussie slid to as weak as 85.38 US from 86.45 cents yesterday in New York.


Business Newsletter

Read the leading stories from the world of Business.

Also in Business