Euro Drops Versus Yen on Debt Concerns, Rising Yields | IFCM
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Euro Drops Versus Yen on Debt Concerns, Rising Yields - 11.4.2012

US Dollar Amid a new wave of European debt concerns and increased demand for safety the dollar gained some ground yesterday against the major counterparts, except the Japanese yen. The currency’s index even climbed above 80 before sliding today in Asian trading to 79.82. At the same time investors boosted demand for Treasury notes. The yield of the benchmark 10-year government debt securities dropped below 2% yesterday for the first time since the beginning of March. Euro The euro lost ground yesterday against the Japanese yen, but looked more or less stable against the US and UK counterparts. The single currency dropped from 107.47 to 105.47 versus the yen and touched in the morning a 7-week low at 105.45, while trading around 1.3100 against the greenback, as Spain’s Prime Minister Mariano Rajoy said “a good part of Spain’s future is at stake.” The Prime Minister has already announced last month that the nation would fail to reach its budget deficit target of 5.3% of GDP in 2012, compared with 8.5% in 2011. Spanish government 10-year bond yields started to increase at the beginning of March from nearly 4.90% and touched yesterday the highest since the beginning of December 2011 at 5.98%. The spread with equal German papers therefore has widened to more than 430 points. Italy’s borrowing costs are also pointing higher. The 10-year yield rose to 5.69% yesterday, the highest since February 2012, before the government sells 11 billion euros of bills today and longer-term debt tomorrow. Another factor contributing to the weakness of the euro yesterday was economic data from France. Reports showed that French business sentiment deteriorated in March and manufacturing production decreased in February by 1.2%, following a 0.1% drop in January. No highly important data are scheduled to be released in Europe today, but the ECB April monthly report and February’s euro area industrial production statistics tomorrow as well as March German CPI reading on Friday will be of high importance. Japanese Yen The Japanese currency remains strong in April. Yesterday the yen strengthened against the euro and the dollar as well. The US currency dropped from 81.55 to 80.61, touching the lowest level in 5 weeks. At the same time Japan reported early in the morning that machinery orders grew in February considerably more than expected. The measure rose by 4.8% from January or by 8.9% from a year earlier. Canadian Dollar The loonie was weak yesterday as crude oil prices, one the major Canada’s export components, feel below 101 dollars per barrel for the first time since March 13. The greenback appreciated against its northern counterpart from 0.9949 to 1.0044. In Asian trading the greenback climbed to 1.0051, the highest since January 31 but dropped toward parity by the end of the session. The two-month trading range of the pair 0.9840-1.0050 therefore remained unbroken on a closing basis before Canada reports on March housing starts today.
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