Euro, pound on back foot in Asia

January 26, 2009
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, TOKYO, Jan 26 – The euro and the British pound were under pressure in Asian trade on Monday as traders remained gloomy about prospects for the European economies.

Trade was relatively muted, however, with many Asian players away for the Lunar New Year holiday.

The euro slipped to $1.2925 in Tokyo afternoon trade from 1.2969 in New York late on Friday.

The pound fell to $1.3633, down from 1.3793 on Friday, when it had briefly dropped to a 23-year trough near $1.35.

The dollar firmed to 89.16 yen from 88.77. The euro edged up to 115.20 yen from 115.13.

Markets "have their eyes turned to Europe\’s weakening economy. There are many risk factors – such as its ability to manage its finances – which are unsettling investors," Sumitomo Trust & Banking analyst Saburo Matsumoto said.

Data released on Friday showed Britain is in recession for the first time since 1991 after its economy shrank 1.5 percent in the fourth quarter of 2008 from the previous quarter.

"The pound is the weakest currency among majors," Yuzo Sakai, a currency manager at Tokyo Forex and Ueda Harlow, told Dow Jones Newswires.

"Any news showing further deterioration in the sluggish UK economy could drag the pound below 117 yen and $1.33."

The pound was at 121.04 yen in late Tokyo trade. Sterling has plunged by more than half from a peak above 250 yen in July 2007.

Concerns over the European economies eclipsed worries about the problems of the United States, which is set to release another slew of data this week.

"While data out of United States is expected to be bad, the government is drawing up policy responses designed for a single country, whereas Europe has lots of different governments," said Matsumoto.

Analysts expect official data due on Friday to show the US economy contracted by 5.5 percent in the fourth quarter, which would be the largest such fall since 1982.

On Wednesday the US Federal Reserve is likely to keep its key lending rate unchanged for the first time in more than a year, as rates have already been reduced to a range of zero to 0.25 percent.

Traders are looking for new announcements from the Fed on more unorthodox policy measures to shore up the financial system and the economy, dealers said.

Against other Asian currencies, the dollar rose to 11,190 Indonesian rupiah from 11,153 on Friday, to 1.5070 Singapore dollars from 1.5049 and to 33.77 Taiwan dollars from 33.61.

The greenback slipped to 47.21 Philippine pesos from 47.31 and to 1,390 South Korean won from 1,393, while holding steady at 34.90 Thai baht.

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