WSJ:WORLD FOREX: Euro Remains Fragile Despite Some Gains In Asia
-- The euro recoups early losses but stays fragile
-- The dollar likely to shine amid global uncertainty
-- Bank of Japan governor stresses the need for Japan to prepare for the possibility of major financial turmoil
By Tatsuo Ito
Of DOW JONES NEWSWIRES
TOKYO (Dow Jones)--The euro recouped early losses in Asia Thursday but deepening gloom over the euro-zone debt crisis has left the single currency fragile, while the dollar is likely to keep its strength as global uncertainty grows.
At 0450 GMT, the euro was at $1.3370 from $1.3344 late Wednesday in New York, according to EBS via CQG. It fell as low as around $1.3341 in early trade following a poorly received auction of 10-year German bonds and concerns over a possible downgrade of France's debt rating by Fitch Ratings. Continued risk-aversion, along with a fall in Asian share markets, made traders hesitant to buy riskier currencies like the euro except for short covering.
"The euro will remain on a downward trend," said Koji Fukaya, director of Global Foreign Exchange Research at Credit Suisse Securities in Japan. "Amid this dire situation, nobody is willing to buy European bonds for now."
Germany drew bids of EUR3.9 billion for EUR6 billion of bonds Wednesday. The poor result signals that the crisis may have started affecting the euro zone's biggest economy, which may have to foot the bill to resolve the region's debt crisis, analysts said.
Fukaya expects the euro to eventually to test $1.3000 on the downside, with its rebound likely to be capped at $1.3500. The market will keep an eye on Germany's November Ifo business climate index at 0900 GMT.
Meanwhile, demand for "global cash" has led to a strengthening of the dollar, Fukaya said. The yen, which is so regarded as a safe haven, may not benefit under the current circumstances, he added.
"A flight-to-quality type of dollar purchase is elevated" amid the European turmoil and global equities sell-offs, said Citibank's Japan forex chief strategist Osamu Takashima.
He added that this has also given the dollar/yen support at around Y77.00. Bank of Japan Gov. Masaaki Shirakawa Thursday stressed the need for Japan to prepare for the possibility of being roiled by major financial turmoil stemming from Europe's crisis, according to government officials.
"How to respond to large tsunamis from overseas would be crucial" for the Japanese economy, Shirakawa said at a monthly meeting of economy-related ministers.
The dollar was at Y77.08 from Y77.32 in late New York Wednesday. The U.K. pound was at $1.5549 from $1.5524, while the dollar was at CHF0.9193 from CHF0.9202. The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at about 78.914 from 79.066.
Interbank Foreign Exchange Rates At 00:50 EST / 0450 GMT
