Yen Hits Euro Hard
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A wave of risk aversion swept through currency markets
Friday pushing the dollar and the yen higher and knocking the euro sharply
lower.
The euro sank to $1.4394 from $1.4504 and to 130.57
yen from 131.93 yen. The dollar recently traded at 90.71 yen from 91.09 yen
late Thursday in New York,
according to EBS. The dollar was also up at 1.0268 Swiss francs from 1.0182
francs, while the pound fell to $1.6282 from $1.6335.
The decline in sentiment began in New York Thursday when retail-sales data for
December failed to live up to expectations and renewed concern about the health
of the economic recovery.
Markets had already turned jittery after European
Central Bank President Jean-Claude Trichet made it clear earlier Thursday that
the central bank isn't about to help Greece with its debt problems. Mr. Trichet
told a press conference after the latest ECB policy meeting that the bank isn't
going to give "special treatment" to any single country that finds
itself in trouble.
This once again raised the specter of a Greek default,
which pushed up the cost of insuring Greek debt through credit derivatives even
further.
The mood of the market only deteriorated further after
an unsubstantiated rumor circulated that German Chancellor Angela Merkel could
resign. An official denial from Berlin still failed to help the euro, which by
then was also suffering from a report from the World Economic Forum warning
that there is a one-in-five chance of another asset price bubble implosion that
could cost the world economy another $1 trillion.
By the time European trading got underway, the single
currency was lower across the board with the yen rising even against the dollar
as investors sought a safe haven.
Market participants are now expected to focus on a
stream of fresh economic data from the U.S. later in the day as well as
the start of the U.S. bank earnings season.
Some analysts reckon that the dollar could be at risk
if the latest Empire
State survey fails to
show a rebound in manufacturing activity this month after a sharp decline last
month. The consensus forecast is for the main index to have risen to 12.8 from
2.55. Others expect strong earnings from J.P. Morgan and Merrill Lynch to boost
optimism about the recovery and an end to the credit crunch.
In either case, however, the actual reaction in
currency markets could be muted as investors square their books ahead of a long
holiday weekend in the U.S.
Source: wsj.com