MW: Euro stays down after Azumi comments; yen drops
Japan may have ‘green light’ to intervene, analyst says
By Deborah Levine and William L. Watts, MarketWatch
NEW YORK (MarketWatch) — The euro retreated Tuesday, remaining lower after comments from Japan’s finance minister in the wake of a Group of Seven teleconference that some analysts had expected would lead to more information about possible solutions to Europe’s sovereign debt and banking crisis.
Jun Azumi’s comments about the Japanese yen and excess volatility in currency markets sent the yen down sharply against the dollar and euro.
The euro EURUSD -0.3280% traded at $1.2453, down from $1.2493 in North American trade late Monday. The shared currency had traded as high as $1.2542 in earlier activity.
The dollar index DXY +0.22% , which measures the greenback against a basket of six major currencies, rose to 82.779 versus 82.528 late Monday.
The Tuesday discussion among G-7 finance ministers and central-bank governors focused on the European debt crisis, Azumi said, according to Dow Jones Newswires. G-7 membership comprises the U.S., the U.K., Japan, Germany, France, Italy and Canada. Related story: Frustrated ECB seen unlikely to move just yet
Azumi said during a press conference that the G-7 wouldn’t issue a joint statement, but that European members said they would tackle euro-zone problems such as Spain and Greece, according to Dow Jones Newswires. Officials didn’t discuss the possibility of a Greek exit from the euro, Bloomberg reported.
Ahead of the conference call, Mitul Kotecha, head of global foreign-exchange strategy at Crédit Agricole, said G-7 officials were “expected to put more pressure on European leaders to act.”
However, “the respite looks temporary unless followed by concrete measures out of the euro zone,” he said.
The euro was up before Spain’s treasury minister warned that higher borrowing costs are shutting the country out of financial markets.
In an interview with a Spanish radio broadcaster, Treasury Minister Cristobal Montoro said the high risk premium on Spanish debt “says that as a state we have a problem in accessing markets, when we want to refinance our debt.” Read about Montoro.
Montoro also said Spanish banks don’t need “excessive” amounts for recapitalization, while calling on European institutions to “open up and help us achieve, help facilitate that figure because we’re not talking about astronomical figures,” according to Bloomberg News.
“Although his comments were meant to reassure the market, they had the opposite effect,” said Boris Schlossberg, director of currency research at GFT. “Jittery currency traders viewed Mr. Montoro’s statement as further confirmation that Spain may be headed for credit-crunch disaster.”
Japanese yen drops
Azumi also expressed concerns about the Japanese yen’s recent rise, describing it as “sharp,” and said the G-7 had no objection to Tokyo’s stance on excessive volatility and disorderly moves in currency markets, Dow Jones Newswires reported.
The U.S. dollar USDJPY +0.41% turned up against the Japanese yen to buy ¥78.67, compared with ¥78.33 late Monday.
The euro erased losses versus the yen EURUSD -0.35% to buy ¥97.92, from as low as ¥97.03 earlier, but little changed on the day.
Traders may interpret Azumi’s comments as indicating Japanese officials have “a green light to intervene” and push the yen down, said Sebastien Galy, a currency strategist at Societe Generale. But, much like last week, that doesn’t mean it will actually happen. Read about Japanese yen intervention worries.
“Hope flares once again, disappointment will eventually come,” he said in emailed comments.
Among other major currency pairs, the British pound GBPUSD -0.05% pared losses to $1.5371, down from $1.5382 Monday. London markets remain closed for the Queen’s Diamond Jubilee.
The Australian dollar AUDUSD +0.27% trimmed most of its gains versus the U.S. unit notched after the Reserve Bank of Australia cut its policy interest rate by a quarter-point to 3.5%, a smaller reduction than some analysts expected. Read more about the RBA decision.
The aussie bought 97.48 U.S. cents, down from 97.54 cents just before the decision was announced, and little changed from late Monday.
Deborah Levine is a MarketWatch reporter, based in New York.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt. Varahabhotla Phani Kumar in Hong Kong contributed to this report.
