Feb. 19 (Bloomberg) -- The euro rose from near a three- month low against the dollar on speculation German Chancellor Angela Merkel will signal Europe's largest economy plans to take action to help avert the financial turmoil in the region.
The euro snapped three days of losses against the dollar after Finance Minister Peer Steinbrueck said yesterday Germany would show its "ability to act" as some of the 16 countries that share the currency are getting into difficulties. Merkel will hold a joint press conference with European Commission President Jose Barroso in Berlin today.
"Eurozone countries have started to recognize the importance of the financial system and begun to address it properly," said Akio Yoshino, chief economist at Societe Generale Asset Management Ltd. in Tokyo. "Optimism about the stabilization of the European financial system may help to halt the recent steep decline of the euro."
The euro climbed to $1.2582 as of 11:40 a.m. in Tokyo from $1.2530 late in New York yesterday, when it touched $1.2513, the lowest level since Nov. 21. Europe's single currency advanced to 117.81 yen from 117.50 yen. The dollar traded at 93.64 yen from 93.79 yen yesterday, when it reached 93.96, the highest level since Jan. 7.
Merkel's Cabinet also approved yesterday a draft bill allowing the state to take control of property lender Hypo Real Estate Holding AG, paving the way for the first German bank nationalization since the 1930s. The bill, which will be put to parliament on April 3, allows the government to carry out compulsory purchases of shares in "systemically relevant" banks.
"This is an appropriate response when it comes to resolving the banking system problem," SG's Yoshino said.
Bank Results
Gains in the euro may be tempered by concern European companies will report steeper-than-expected losses stemming from the global financial turmoil.
Axa SA, Europe's second-largest insurer, will probably report today a net loss of 1.76 billion euros ($2.21 billion), according to a Bloomberg News survey of analysts, down from a year-earlier profit of 2.49 billion euros, as slumping stock markets eroded the value of the company's investments.
BNP Paribas SA, France's largest bank by market value, will today likely post a loss of 1.36 billion euros, and Deutsche Postbank AG, Germany's biggest consumer bank by clients, may report a quarterly loss because of credit-related writedowns, according to separate Bloomberg surveys.
'Be Alert'
"We also need to be alert to the ongoing quarterly results of European financial institutions," said Minoru Shioiri, senior foreign-exchange dealer in Tokyo at Mitsubishi UFJ Securities Co., an unit of Japan's biggest banking group "These reports may revive concerns about the depth of the problem in the financial system."
Demand for the dollar was tempered on speculation the nation's largest automakers will fail unless they get increased government aid.
General Motors Corp. and Chrysler LLC, which are seeking as much as $21.6 billion in additional federal assistance, have a 70 percent likelihood of filing for bankruptcy, Moody's Investors Service said yesterday. GM and Chrysler met a deadline yesterday requiring they show progress in revamping operations with $17.4 billion in loans granted so far.
"The uncertainties about the big three automakers may weigh on the upside of the dollar," said Takashi Kudo, director of foreign-exchange sales in Tokyo at NTT SmartTrade Inc., a unit of Nippon Telegraph and Telephone Corp. "If a Chapter 11 filing happens, the initial reaction should be a sell-off of the dollar."
The Bank of Japan may today unveil details of a plan to buy corporate debt and extend lending programs in place to prevent a shortage of credit from deepening the nation's recession, according to a Bloomberg News survey.
Governor Masaaki Shirakawa and his colleagues have said they want to lower companies' borrowing costs rather than trim the key interest rate, which is already close to zero. Policy makers will probably keep the overnight lending rate at 0.1 percent today, economists surveyed by Bloomberg News predict.
All the posting are delayed, I can share live updates of my content via emails. If you are interested to receive live updates, send an email to me at atraderx@gmail.com.
0 comments
Post a Comment