Dollar, Euro High Vs Yen
The euro and dollar gained to session highs against the yen Monday as risk appetite continued to gain steam in currency markets with stronger stocks. Higher stocks encourage traders’ appetite for risk; declines in equities lead foreign exchange traders back to the major funding currencies, dollar and yen. The euro advanced to Y129.85 and the dollar rose to Y96.14, significant turns after hitting multi-week lows overnight. Stocks will continue to be a key indicator for currencies this week given a data-light schedule, according to strategists. Earlier, euro, Australian dollar and U.K. pound also hit intraday highs against the U.S. unit.
Still, analysts add that the moves in foreign exchange are within recent ranges and are subject to continued swings in equities markets. Daragh Maher, deputy head of foreign exchange strategy at Calyon in London, says currencies are likely to stay within current ranges until the key news for stocks – the status of U.S. banks and the Treasury Department’s plans – turn clearer. Geithner’s plan and the next stage of the U.S. recovery process, getting banks in order, next month,” said Maher – that will be the next big market moving event.
Near noon on Monday in New York, the euro was at $1.3497, up from $1.3488 late Friday. The dollar was at Y96.13 from Y95.10, according to EBS. The euro was at Y129.75 from Y128.28. The U.K. pound was at $1.5302 from $1.5175. The dollar was at CHF1.1185 from CHF1.1224 late Friday. The yen may also be under pressure after Moody’s Investors Service on Monday cut Japan’s foreign-currency debt rating and after comments from Japanese Vice Finance Minister Kazuyuki Sugimoto. He said Monday that the Japanese government is continuing to monitor the foreign exchange market closely after the yen’s recent strengthening.
The negative impact of excessive market volatility on the economy and financial markets is undesirable,” Sugimoto said at a regular press conference. The rally in risk may have also been prompted by elections in India, according to several analysts. Over the weekend, Prime Minister Manmohan Singh’s Congress Party was returned to power with strong backing. Indian stock market surged 17% and the rupee gained 3% on the better than expected results for the general elections,” said Win Thin, senior currency analyst at Brown Brothers Harriman in New York. He said that India’s rupee could break important technical levels, but warned against getting too bullish on India.
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