Euro Strengthens After Moody’s Announcement

By TraderVox.com

Moody’s Investor Service announcement on the state of the credit ratings of Spain and Italy have resulted to a drop in their borrowing costs at debt sales. However, the euro has gained against its major peers despite the negative news.

The euro was strong against 12 of it 16 major peers in light of the new report from Germany indicating increased investor confidence. The yen; however, dropped to three-week low after the Bank of Japan announced additional stimulus of 10 trillion yen to increase the asset-purchase fund to 30 trillion yen. The euro showed vigor against major peers even after six of the regions members were downgraded in their credit ratings due to the debt crisis engulfing the region.

According to Peter Rosenstreich, a Chief Currency Analyst at Swissquote Bank SA in Geneva, the decision by Moody’s did not come as a surprise but he stated that the euro has held under worse conditions and he see the euro holding up. He added that the pressure on euro currently will ease as risk appetite continues to dominate the market.

Against the Japanese yen, the Euro rose 0.8% to settle at 103.07 at 7:28 am in New York and showed strength against the dollar by raising 0.1 percent to settle at 1.3196. Against the dollar, yen declined to 78.11 yen per dollar which was a 0.7 percent drop after the bank of Japan announced its intervention measures.

The pound declined against the euro following Moody’s warning on it credit rating if the debt crisis continues. According to Moody’s report, UK risks losing its Aaa credit rating if the debt crisis in Europe continues. The reason for this was indicated as the weaker macroeconomic environment. To compound the pounds misery, ZEW confidence figures are against the pound.

The pound depreciated to 83.78 oence per euro which represents a 0.2% decline. With this announcement, investors are now looking at tomorrow’s Bank of England announcement. They will be particularly interested to know more about the new economic and inflation forecasts that will be set by the bank.

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