Dollar falls more against Japanese yen, near lowest levels ever
NEW YORK(MarketWatch) — The euro declined against the dollar Friday, giving back some of the prior session’s sharp gains after a deal announced by European leaders to contain the region’s sovereign-debt and banking crisis.
Among the details investors awaited was whether Asian countries will get behind and contribute to Europe’s rescue plan. Skeptics consider this key to determining whether the shared currency could continue higher or not.
The euro EURUSD -0.28% fell to $1.4149, down from $1.4208 in late New York trading Thursday.
The dollar index DXY +0.07% , which tracks the greenback against six major currencies, pared losses due to a decline against the Japanese yen, the second-biggest component of the index behind the euro.
The index fell to 75.106 from 76.207 in the prior session.
On Thursday, the euro jumped the most in two and a half years as financial markets greeted European leaders’ deal to cut Greek debt, recapitalize the region’s banks and boost the capacity of the euro zone’s rescue fund by fivefold, to about $1.4 trillion.
China had welcomed the deal and Klaus Regling, chief executive of the European Financial Stability Facility, was in Beijing on Friday to seek Chinese participation in the fund.
“A strong support from China could boost the risk-taking sentiment [in markets] further,” currency analysts at BNP Paribas said in a note.
Speaking at a news conference, Regling said there woud be “no conclusion, certainly, today during our visit,” according to Dow Jones Newswires.
“The market nonetheless remains optimistic that China will invest in the EFSF, though it will come with conditions and reportedly depend on other country participation,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman. “Over the next few months, we in fact continue to believe implementation risks and economic growth are the likely catalyst that prompts a renewed weakness in the euro.”
The dollar extended gains slightly after a report showing that U.S. incomes were weak in September but that spending rose as consumers dipped into savings. See story on 0.6% growth in U.S. consumer spending for September.
Analysts say while many details of Europe’s plan have yet to be determined, attention is likely to shift back to economic data — which seem to be improving in the U.S. and faltering in Europe — and the response of monetary-policy makers.
The Federal Reserve meets next week amid some speculation that it may roll out another program to buy more bonds, though probably mortgage-backed debt instead of U.S. Treasurys.
The European Central Bank meets next Thursday, in what will be the first meeting for incoming president Mario Draghi. Read more on ECB’s Mario Draghi.
Yen at record lows
At the same time, the dollar USDJPY -0.27% continued to slump to record-low territory against the yen, falling to ¥75.74 from ¥75.92 late Thursday. It touched ¥75.69 on an intraday basis, according to FactSet Research.
The jump by the yen has raised investors’ concerns that the Bank of Japan might intervene to stem the currency’s appreciation, which is hurting the competitiveness of Japan’s exports.
“Will they or won’t they intervene unilaterally in dollar/yen? The odds are not good in a risk-on environment,” said Sebastien Galy, currency strategist at Societe Generale, in a note.
Japan’s also being courted by the European Union to help in the rescue plan, which would give it another opportunity to weaken its currency against the euro, at least, Galy said.
Against the yen, the euro EURJPY -0.58% recently fell 0.4% to ¥107.24.
Deborah Levine is a MarketWatch reporter, based in New York.
Nick Godt is a MarketWatch reporter based in Mumbai.
