Yen rebounds after prime minister survives no-confidence vote
By Deborah Levine and V. Phani Kumar , MarketWatch
NEW YORK (MarketWatch) — The dollar slid to a three-week low against the euro Thursday, as comments from European Central Bank President Jean-Claude Trichet boosted hopes for a more coordinated fiscal policy to deal with the high debts of euro-zone member countries.
“Investors have found solace in the words of European leaders late in the week,” said Andrew Wilkinson, senior market analyst at Interactive Brokers.
The Japanese yen turned higher after Japanese Prime Minister Naoto Kan survived a no-confidence vote, easing worries about political turmoil as the government continues to deal with the aftermath of the March earthquake, tsunami and nuclear disaster.
The dollar index DXY -0.23% , which measures the greenback’s performance against a basket of six global currencies, fell to 74.502 from 74.740 in late North American trading Wednesday.
The euro EURUSD +0.8519% rose to $1.4451 from $1.4362 Wednesday. At one point, the single currency touched $1.4486, its highest level since early May.
The euro jumped against the Swiss franc, a pair often viewed as a cleaner indicator of sentiment about the euro zone than the euro-dollar.
The euro EURCHF +1.0198% rose to buy 1.2180 Swiss francs, from 1.2099 Swiss francs late Wednesday, when it touched a record low.
The euro strengthened after Trichet called for much tougher fiscal intervention within the euro zone and suggested the creation of a euro-zone finance ministry, according to Dow Jones Newswires.
“Like us, the ECB has probably gotten tired of the cacophony of voices making pronouncements about the debt crisis, and seems to favor a single overriding voice for the narrative,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman. “This is nice in theory,” but could take years to implement, he added.
Wilkinson also noted comments from German Chancellor Angela Merkel, supporting the euro as a stable currency.
“We don’t have a euro problem in Europe,” she told a business forum in Singapore, according to Dow Jones Newswires. “Rather we have a debt problem to overcome.”
The dollar remained lower after the U.S. Labor Department’s report on weekly unemployment claims showed that fewer Americans filed for benefits, but the data were still at a level that worries investors about the job market’s health. See story on jobless claims.
The report comes one day before the government’s monthly jobless report, which is expected to show a slowdown in hiring in May.
The euro reacted little to Moody's Investors Service’s downgrade of Greece’s credit rating late Thursday, as many investors already expect the country to default or restructure in some form in the near future. Read blog about Greece, Cuba’s ratings. See story about Moody’s downgrade of Greece.
“The growing likelihood of a default event in Greece and the knock on implications for the other peripheral nations now makes us think that the current healthy rally should be viewed as no more than an opportunity to reduce exposure further to the troubled region,” said Simon Derrick, chief currency strategist at Bank of New York Mellon.
Japan’s Kan
The yen was also subject to political news, as Japan’s Prime Minister Naoto Kan defeated a no-confidence vote.
Before the parliamentary vote, Kan signaled that he would step down at some point in the future, once reconstruction efforts related to the March 11 disasters were firmly under way. Read more on Japan, Naoto Kan.
The yen “staged a bit of a relief rally versus the dollar,” said Kathleen Brooks, research director at Forex.com. “Japan remains mired in political turmoil, but it has delayed a total catastrophe, which is the last thing the country needs right now as it tries to rebuild after the March earthquake and ensuing nuclear disaster.”
The dollar USDYEN +0.0371% fell as far as 80.56 yen, before recovering to buy 80.95 yen, from ¥80.94 Wednesday. The euro EURYEN +0.86% rose to ¥116.97, versus ¥116.43.
On Wednesday, the dollar had turned higher after weak jobs data shook confidence in the strength of the U.S. recovery and persuaded investors to seek refuge in safer assets.
