Euro Remains Low against the Yen Prior to German Data

By TraderVox.com

Tradervox.com (Dublin) – Euro area has been handed another blow by Moody’s when it set Germany’s rate outlook to negative together with the European Financial Stability Facility. As Moody’s was making the announcement, the euro remained at its lowest in eleven years against the yen as well as extending its losing streak against the US dollar to the longest in two months. The drop in euro came as Italy’s borrowing cost advanced yesterday. The loss also came prior to a German IFO Business Confidence report which is expected to show a drop for the third straight month. The yen has continued to strengthen against major pairs as Japan posted a trade surplus greater than the market expectation.

According to Mike Jones, a currency strategist at Bank of New Zealand in Wellington noted that the weaknesses in euro zone economy are spreading from peripheral economies to Germany, the largest economy in the region. He said that the German IFO Business Confidence data will support his remarks as he is one of the economists who expect the index to fall. As the German economy succumbs to weaknesses in other countries the euro will remain low against most of its peers as investors seek safety in yen and dollar.

As the Ifo Institute releases its report in Munich today, it is expected that the index will fall from 105.3 to 104.4 this month. As this happens, Italian 10-year benchmark yields rose to 6.598 yesterday and its spread over Germany’s bunds widened the most since November 16 last year. The euro remained down against the yen, trading at 94.35 yen after it dropped to 94.12 yesterday, which is the lowest it has been since November 2000. The 17-nation currency was trading at $1.2071 today during Tokyo trading session. It had closed the day at $1.2061 in New York yesterday. The Japanese currency remained strong against the dollar, trading at 78.16 yen.

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