Euro Regains Slightly - 11.11.2011
US Dollar
Asian stocks were mostly higher on Friday following modest gains of the US peers. Japanese Nikkei added 0.16% by the end of the session, after S&P 500 rose by 0.86% yesterday. Investors’ sentiment improved somewhat on several positively taken news from Europe and on favorable macroeconomic data from the United States. In particular yesterday reports showed the US trade deficit unexpectedly narrowed in September and the number of jobless claims fell to a seven-month low. According to the Commerce Department, imports exceeded exports by 43.1 billion dollars in September, declining by 4% from August, while both components increased. At the same time the Labor Department reported that the number of initial claims for unemployment benefits dropped last week by 10000 to 390000, leaving more space for economic acceleration. The dollar weakened against all its major counterparts as investors reduced demand for safety, sending the 10-year Treasuries yield back above 2%.
Euro
The euro on the other hand gained ground against the greenback. After touching a one-month low 1.3483 due to rising Italian borrowing costs, the single currency recovered yesterday to 1.3652, staying above 1.36 in Asian trading hours today. The yield for Italy’s 10-year government bonds rose to 7.46% on November 9. Yesterday Italy tested investors’ demand for short-term debt papers and probably with the help from the European Central Bank, the 10-year yield fell to 6.9%. The successful auction supported the euro, but the risks are still high as France’s 10-year bond yield jumped to 3.48%, widening its spread with German bunds to a record. However, the rating agency Standard & Poor’s confirmed that France’s credit rating remains triple-A. Finally, Greece named the former vice president of the European Central Bank, Lucas Papademos, to be the new head of the national unity government, which is expected to ensure implementation of the 26 of October euro summit decisions.
Japanese yen
The yen continues to strengthen against the dollar. Pair USD/JPY fell in Asian trading hours to 77.49 – the lowest level since the latest intervention on October 31. Japanese Finance Minister Jun Azumi keeps saying that he is “watching markets with great interest for speculative trading and excessive movements.” The minister expressed concerns that “unstable factors for markets including stocks are increasing since last week because of Europe, especially after problems emerged in Italy.” Ongoing instability in the euro region may give additional support to the Japanese refuge currency.