Market Review – 21/12/2010 21:23 GMT
Euro falls due to ratings warnings on Portugal and Greece
Euro weakened against dollar on Tuesday after Moody’s said it might downgrade Portugal’s ratings. Euro was further pressured as Fitch put Greece on rating watch. These prompted traders to lighten up on the single currency during the pre-holiday trading session.
Moody’s Investor Service said it might downgrade Portugal’s A1 rating by one or two notches after a review as it cited ‘uncertainties about Portugal’s longer-term economic vitality, which will be exacerbated by the impact of fiscal austerity.’ Fitch also warned it might cut Greece’s BBB- longer term foreign and local currency issuer default ratings. Although euro initially rose to 1.3202, the single currency retreated from there and fell to 1.3073 in NY session before staging a minor recovery. Cross-selling in euro also pressure price as eur/chf slumped to a fresh record low of 1.2547.
Earlier in Asia, euro was supported as Chinese Vice Premier Wang Qishan said on Reuters news that ‘China supports efforts by the EU and the IMF to calm global markets in the wake of Europe’s debt crisis but is keen to see more results in the meantime.’
The greenback briefly dipped to 83.50 versus the Japanese yen but the pair managed to rebound strongly and reached 83.91 in NY session before retreating sharply.
BOJ ended its monetary meeting and kept overnight call rate target unchanged at 0-0.10%. BOJ said policy board decision on call rate was unanimous and would steadily buy various assets and provide longer-term funds under asset buying fund.
The British pound rose to 1.5567 initially but cable swiftly retreated from there. Cable fell further after the release of higher-than-expected U.K. PSNCR and PS net borrowing. U.K. PSNCR was 16.811 billion pounds in November, versus the consensus forecast of 14.000 billion pounds whilst U.K. PS net borrowing was 22.774 billion pounds against the economists’ forecast of 17.00 billion pounds. Cable eventually tumbled to 1.5437 in NY session before stabilising.
Economic indicators to be released on Wednesday include:
New Zealand current account, Japan trade data, Germany import price index, UK GDP, US home sales data and GDP.