Previous session overview
The euro remained under pressure in Asia Monday, falling to a record low against the Swiss franc, as investors bet the new week could bring fresh negative news on the euro-zone's sovereign debt problems.
The loss of Spanish Prime Minister Jose Luis Rodriguez Zapatero's Socialist Party in municipal and regional elections Sunday has added to concerns over the common currency by highlighting political instability in the euro-member as it grapples with economic and fiscal problems. A new volcanic eruption in Iceland has compounded the euro's headache by reviving concerns over broader economic damage to the euro-zone, a year after separate eruptions in Iceland caused chaos for air travel in the region.
At 0450 GMT, the euro was down at USD1.4072 from USD1.4162, and at JPY115.30 from JPY115.65 late Friday in New York.
The ICE Dollar Index, which measures the greenback against a basket of currencies including the euro and yen, rose to a month and a half high at 76.028. At 0450 GMT, it stood at 75.980, up from 75.626 late Friday in New York.
The Pound is also lower against the dollar this morning, but is higher against the EUR. The pound gained on its mainland European counterpart as investors scale back expectations that the gap between GBP and EUR yields will widen this year.
The Australian dollar plummeted in Asian trade Monday, damped by sweeping concern about ongoing debt issues in Europe and a weak reading of China's manufacturing industry. At 0610 GMT, the Australian dollar was changing hands at USD1.0552, down from USD1.0660 late Friday. Against the Japanese yen, the Australian dollar was at JPY86.515, down from JPY87.135.
Market expectation
Dealers said the euro may fall further as investors grow increasingly jittery over debt woes after Fitch cut Greece's credit rating three notches Friday and S&P lowered its outlook on Italy.
Dealers said the euro may continue tumbling against the Swiss franc after earlier marking a record-low at CHF1.2345, having triggered stop-loss selling orders below CHF1.2380. It could drop to CHF1.2300 later in the global day, dealers said.
Speculation that the Swiss National Bank will likely refrain from intervening to stop the surge in its currency against the euro may green light further euro selling, dealers said.
Dealers and analysts say the yen could weaken further against the greenback this week if Japanese trade data for April due Wednesday highlights a continued slump in exports and the country's trade balance after the March 11 mega quake, tsunami and nuclear crisis. Exports declined for the first time in 16 months in March, as production was disrupted by the disaster. Economists expect a large deficit in the trade balance in April.
Traders will also be watching U.S. interest rates, which they say could be swayed this week by U.S. indicators including new residential sales for April on Tuesday and the advance report on durable goods for April due Wednesday. Attention will also focus on debt issuance including a two-year Treasury sale Tuesday, five-year auction Wednesday and a seven-year note tender Thursday, traders said.
Legal disclaimer and risk disclosure
This overview can be used only for informational purposes. Dukascopy SA is not responsible for any losses arising from any investment based on any recommendation, forecast or other information herein contained.
