Monday January 12, 2009
The euro fell on Monday, hitting a 1-month low against a broadly firmer yen as investors shunned riskier assets, while it was also pressured on expectations that euro zone interest rates will be cut further later in the week. European shares retreated nearly 1 percent on the day, following a rout in Asian shares after Friday's U.S. payroll data showed the world's largest economy lost more than one million jobs in the final two months of the year. Data last week showed factory output collapsing across Europe, raising the prospect for a sharp economic downturn and increasing expectations for a large rate cut when the European Central Bank meets to decide policy on Thursday. Such sentiment was echoed by IMF Managing Director Dominique Strauss-Kahn, who said in a media interview on Monday that Europe was "behind the curve" on taking economic stimulus measures and he expected interest rates to decrease further in Europe.
Investors sought the low-yielding yen as they shunned riskier assets, boosting the Japanese currency to a 3-week high against the dollar as well. The higher-yielding Australian dollar lost 2.5 percent versus the U.S. dollar to hit a low of $0.6833 and fell 2.2 percent against the yen at 61.58 yen, weighed down by risk aversion and lower commodity prices.
Sterling was sharply lower as it has also been viewed as a high-risk currency, dropping by 1.3 percent against the dollar to below the $1.50 mark. The pound also fell 1.5 percent against the yen at 134.34 yen. Escalating worries that the global economy will be mired in recession this year raised risk aversion created selling pressure on the GBP. UK economic output fell1.5% in the Oct-Dec timeframe, its fastest contraction since 1980.
Among other news, the Russian central bank staged the latest in a series of mini-devaluations of its currency as it allowed the rouble to weaken for the second day running. Weak oil prices, the gas row with the Ukraine and the prospects of an economic recession have been a downward pressure on the RUB. This is the 14th mini devaluation in 2-months.
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