Currency Trading: Euro Tumbles Below $1.20 Friday
(From THE WALL STREET JOURNAL)
By Bradley Davis
NEW YORK -- The euro sank to the weakest point in more than four years against the dollar as a disappointing U.S. jobs report, combined with fears the euro-zone sovereign-debt crisis is spreading across the region, led investors to flee risky assets.
The common currency has shed more than 15% of its value against the dollar in 2010, as the sovereign-debt crisis spread along the periphery of the euro zone and triggered fears it could infect Europe's financial system -- and perhaps even stymie the global economic recovery.
The common currency on Friday fell below $1.20 -- the 10-year average -- and is on a course that could bring it to $1.18, where it exited the first day of trading when the euro was introduced in 1999.
The common currency initially weakened Friday on worries Hungary would be the next country to fall victim to a debt crisis, joining such fiscally stressed euro-zone countries as Spain and Portugal.
Worse-than-expected U.S. jobs data then added fuel to the fire, causing investors to question the pace of the global economic recovery, and leading them to head for the perceived safety of the dollar, yen and Swiss franc. The commodity-linked Australian dollar shed 2.3% against the greenback, while the Canadian dollar also weakened.
Late in New York on Friday, the euro was changing hands at $1.1966, compared with $1.2158 late Thursday in New York and the intraday low of $1.1956. The dollar weakened to 91.69 Japanese yen from 92.63 yen. The euro weakened to 109.72 yen from 112.62 yen.
The U.K. pound weakened to $1.4476 from $1.4616. The dollar strengthened to 1.1617 Swiss francs from 1.1567 francs.
The dollar rose 2.54% on the week against the euro, to a new 52-week high.
Before the U.S. jobs data was released, the euro touched its weakest-ever point of 1.3866 Swiss francs, putting some investors on alert for a possible fresh round of Swiss National Bank intervention to temper franc strength.
But there was no evidence of Swiss central bank action, one analyst said, even as the euro rebounded slightly intraday.
Investors have turned to the safe-haven franc as the sovereign-debt crisis roiled the bloc of nations that use the euro and as Swiss data showed a resilient domestic economy.
Also pressing on the common currency was Hungary's new government, which failed to calm financial markets put on notice by a senior official's warning that the country faces a Greece-style fiscal meltdown.
Thursday's remarks by the vice president of the election-winning Fidesz party, Lajos Kosa, hit the Hungarian forint, with the dollar strengthening more than 4% against the Hungarian currency
A spokesman for Prime Minister Viktor Orban didn't comment on the official's remarks, saying only that the new government was committed to prevent a Greece-like crisis but that Hungary was in a severe situation.
Hungary's prospects are harmed by the strengthening of the Swiss franc, as many Hungarian mortgages are denominated in Swiss francs, said Marc Chandler, global head of foreign exchange at Brown Brothers Harriman in New York.
French Prime Minister Francois Fillon also contributed to the euro's descent, Mr. Chandler said, by suggesting that the euro's weakening was good news and that he wasn't worried about the current exchange rate. |
