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Euro softens in Asia after Germany vote

By Haris Afzal on Friday, September 30, 2011 with 1 comment

Euro softens in Asia after Germany vote | Business
TOKYO: The euro softened in Asian trade Friday against major rivals after being boosted by Germany's approval of expanding Europe's bailout fund, as

markets stayed cautious over doubts about the fund's power.

The New Zealand dollar fell sharply after Fitch and Standard and Poor's downgraded their debt ratings for the nation, illustrating the challenges also

faced by countries that are seen to have relatively stronger debt profiles.

The euro stood at $1.3572 in Tokyo trade, down from $1.3586, while fetching 103.94 yen against 104.33 yen.

The New Zealand dollar was down at US $0.7659 after the downgrades, from $0.7782 late Thursday.

The US dollar slipped against the yen in Asian trade Friday as investors widely ignored a US government announcement that it would continue stronger

market oversight and expand its intervention war chest in a third extra budget, dealers said.

The dollar traded at 76.60 yen in Tokyo trade, down from 76.79 yen in New York late Thursday.

The euro eased after being boosted by Germany's ratification of proposals to extend the power of the European financial stability facility (EFSF),

soothing concerns over political discord and indicating other nations would follow Berlin's lead.

However, "the bottom line is that there is still a huge degree of scepticism on the ability of policymakers to resolve the crisis in the eurozone periphery

while growth worries have not receded," noted Credit Agricole's Mitul Kotecha. Better-than-expected US data, including an upward revision to second

quarter GDP and lower jobless claims, also improved sentiment.

Japan's Finance Minister Azumi said Friday that Japan plans to boost the size of the nation's war chest to intervene by 15 trillion yen ($195.79 billion) to

"flexibly" respond to the yen's upward trend.

The move would lift the accumulated total amount the government is allowed to borrow from the market to finance intervention to 165 trillion yen.

This means it would be able to raise an additional 46 trillion yen in the future if necessary because it has already used up 119 trillion of the total through

past interventions.

But the government announcement failed to prevent speculative moves in the currency market, as analysts said many investors ignored it.

"We see the announcement to be only verbal and totally unsubstantial," said Nobuyoshi Kuroiwa, senior deputy general manager of the forex team at

Hachijuni Bank.

The strength of the Japanese currency, which in August hit a post-war high of 75.95 yen against the dollar, has hammered outward-facing

manufacturers in a country that is heavily dependent on exports.


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