By: Barbara Zigah
Following last week’s narrow miss of a 4-year low versus the U.S. Dollar, the common currency Euro saw slight gains in Asian trading today. As reported at 12:50 p.m. (JST) in Tokyo, the Euro was trading at $1.2275, up slightly from New York’s late trade yesterday of $1.2193. Last week, the Euro approached a 4-year low of $1.2143. Driving today’s gains were short term investors; analysts suggest technical buying may later push the Euro higher to even $1.2350, provided there is no new poor economic news affecting it. Over the long term, however, the outlook for the Euro remains bleak.
Also pressuring the Euro today is investor reaction to a media report that yet another Euro-zone financial institution may be having difficulty locating financing sources for its $1 billion debt balance. That news compounded investors’ concerns that the financial sector in the Euro-zone is deteriorating as a result of sovereign debt problems. Investors may feel compelled to sell off their holdings in the Euro, and there is speculation that institutional investors and central banks world-wide may likewise move to curtail their holdings in the common currency.
An increase in interest rates for U.S. Dollar-denominated instruments is also pressuring the Euro, not only because investors are keen to buy the greenback but because borrowing by Euro-zone banks is now more expensive.