Euro declines on concerns over eurozone health

Tuesday, 9 November 2010 23:42 - - {{hitsCtrl.values.hits}}

The euro lost ground against major currencies on Tuesday as the European single currency faced continued selling pressure over fears about the health of the eurozone, dealers said.

The euro was trading at 1.3862 dollars, down from 1.3917 in New York, while falling to 112.22 yen from 113.02 yen.

It declined in New York on Monday against the dollar, reflecting concern for the fate of several debt-saddled eurozone governments, notably Portugal, Ireland and Greece.

The Irish government plans to cut spending and raise taxes to help bring its deficit down below the eurozone target of three percent of gross domestic product by 2014.

Ireland was the first eurozone member nation to slide into recession in 2008, its economy hit hard by the global financial crisis, a property meltdown and soaring unemployment.

Meanwhile fears over Greek sovereign debt eased slightly after Sunday’s local elections provided a strong mandate for the government to pursue its own fiscal austerity plans.

Mike Jones, currency strategist at the Bank of New Zealand, said the euro was likely to come under further pressure as long as investors remain nervous about the debt situation in Europe.

Against the yen, the dollar also softened on Chinese forex regulator’s announcement of measures to curb hot money inflows, said Kenichi Nishii, senior dealer at Bank of Tokyo-Mitsubishi UFJ.

The dollar traded at 80.96 yen in Tokyo, slightly down from 81.15 late Monday in New York.

China’s State Administration of Foreign Exchange said Tuesday it will strictly manage quotas for the use of short-term foreign debt by financial institutions, and strictly prevent banks from exceeding their quotas.

It will also strengthen its oversight of fund repatriation by Chinese companies listed overseas, and of inbound investment by offshore investors.

“If money flows from overseas decrease, you may see declines in Chinese share and asset prices,” Nishii told Dow Jones Newswires.

“That’s why investors reacted to this announcement by buying the safe-haven yen.”The market is paying attention to Group of 20 summit talks in South Korea later this week, dealers said, amid simmering tensions between China and the United States over economic and monetary policy.

Super-loose US monetary policy has been cited as a factor roiling currency markets, hammering the dollar and prompting a wave of speculative money to pour into Asia and drive up regional currencies.

The dollar rose to 43.25 Philippine pesos from 43.01 on Monday, to 1.2860 Singapore dollars from 1.2856, to 1,114.10 South Korean won from 1,113.20 and to 30.17 Taiwan dollars from 30.15.

Meanwhile, it eased to 8,903.00 Indonesian rupiah from 8,905.00, and to 29.54 Thai baht from 29.61.- (AFP)