In currency markets, the euro dropped around 1% against the dollar, with investors looking towards a G20 meeting on Thursday and Friday for any likelihood of coordinated action to restore market confidence. .
The euro traded around $1.3666, edging back towards a seven-month low hit last week, and fell 0.7% to 105.08 yen.
While expectations of further Fed policy easing might have typically weighed on the dollar, the search for safety meant investors remain keen to hold the currency, which rose 0.8% against a basket of major peers .
The yield on 10-year Treasuries held at around 2.06%, not far from their lowest in 60 years.
"This week will be another good one for the USD with weakness in euro, pound and Aussie," said Joseph Capurso, currency strategist at Commonwealth Bank of Australia.
The pullback in risk appetite also increased demand for safe haven gold, with the precious metal extending its chunky gains from Friday by 0.5% to $1,820 an ounce. It hit a record around $1,920 earlier this month.
Oil fell around $1 due to worries that economic woes could hit demand and on the stronger dollar, which makes it more expensive for holders of other currencies.
Brent crude fell 0.7% to $111.40 a barrel and U.S. crude slipped 1.5% to $86.61.
"Look at what's happening in Europe. People are beginning to see that it is taking a lot longer than anticipated to resolve the issue," Jonathan Barratt, managing director of Commodity Broking Services in Sydney.
"Longer uncertainty means the demand outlook for oil remains weak."
SOURCE: Financial Mirror
Euro Rebounds as G-20 Meets, Stock Rise; Yen at Almost Record
The euro rose against the yen and dollar as global equities erased losses and European Central Bank governing council members said the central bank may step up efforts to ease market tensions.
The Japanese currency pared a weekly advance against its 16 most-traded currencies tracked by Bloomberg after G-20 leaders pledged to address risks in the global economy.
Traders are net long the dollar against its major counterparts for the first time since July 2010. South Korea’s won rose against the dollar after the government said it may intervene to stem its decline. Brazil’s real also gained after the central bank sold dollars.
“People are a little fatigued on policy makers, which is unfortunate because they hold a large portion of control over market sentiment,” said Brian Kim, a currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit in Stamford, Connecticut. “The euro is bouncing and chopping around as stocks move up and down with risk sentiment.”
The euro rose 0.7 percent to 103.40 per yen at 5 p.m. in New York. The shared currency gained 0.3 percent to $1.35, after falling as much as 0.3 percent.
The yen weakened 0.5 percent to 76.61 per dollar and is up 0.2 percent this week. The Japanese currency reached a record high of 75.95 on Aug. 19.
Futures Data
Aggregate bets the dollar will strengthen against the euro, the yen, the Australian, Canadian and New Zealand dollars, the pound, the Swiss franc and the Mexican peso surged to 75,065 contracts in the week ended Sept. 20, according to Commodity Futures Trading Commission Data as compiled by Bloomberg. Foreign-exchange traders are net long the dollar for the first time since July 2010.
The seven-day relative strength index for the euro versus the dollar was 26.7, below the 30 level for the third day. A reading below 30 indicates an asset’s price may have fallen too quickly and may be due for a rebound.
The Standard & Poor’s 500 Index climbed 0.6 percent after losing as much as 0.7 percent. The gauge is down 6.5 percent for the week. U.S. 10-year note yields rose after touching a record low.
The G-20 nations are “committed” to a strong and coordinated international response to address the renewed challenges facing the global economy,” finance chiefs said in a statement released after talks yesterday in Washington.
ECB governing council members, Austria’s Ewald Nowotny and Belgium’s Luc Coene, said in Washington that potential measures include the reintroduction of 12-month loans to banks.
Asked if an interest-rate cut is warranted, Coene said while that wouldn’t help to bring down longer-term borrowing costs, “the ECB has never ruled out things beforehand.”
“There is no immediate liquidity problem for banks, but what we do see is a mismatch where banks have difficulties refinancing themselves longer term,” Nowotny told reporters in Washington today.
Yen Strength
Japan’s currency traded at almost its post World War II high against the dollar today and reached fresh decade-highs against the euro yesterday.
The yen has appreciated 11.2 percent during the past three months, the best performer among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Currency indexes. The dollar, the second-best performer, gained 5.3 percent while the euro has lost 1 percent.
The yen tends to strengthen during economic and financial turmoil because Japan’s current account surplus makes it reliant on foreign capital. The record reached on Aug. 19 spurred the nation to sell 4.51 trillion yen ($59.2 billion) to stem the currency’s appreciation.
The Korean finance ministry said it would “take action” to stabilize the currency market, after holding an emergency meeting with the central bank before markets opened.
The won appreciated, paring its worst week in 16 months, gaining 1.1 percent to 1,167.31 per dollar, paring its weekly slump to 5 percent.
Rupiah Rise
Indonesia’s rupiah climbed the most since May 2010 today paring a weekly loss, on speculation the central bank is intervening to curb volatility. The rupiah added 0.9 percent to 8.941 today, trimming its weekly loss to 1.6 percent.
“With all the G-20 policy makers essentially assembled in Washington you’ve got enough prospect of comments coming out that even if all the comments are not constructive for risk it will give risk a little bit of support,” said Alan Ruskin, global head of Group-of-10 foreign-exchange strategy in New York at Deutsche Bank AG. “In the past 24 hours, you’ve had significant Asian central bank intervention and Brazil reversing currency measures so there’s a perception that emerging currencies have plenty of firepower and reduce volatility.”
Brazil’s real gained against the dollar after the central bank sold currency swap contracts in auctions yesterday, which is equivalent to selling dollars in the futures market. The move, meant to stem the decline of Brazil’s currency which has fallen 5.8 percent this week.
The real rose 3.8 percent to 1.8339 per dollar, from 1.9055 yesterday.
SOURCE: Bloomberg
