By: Barbara Zigah
Bond sales to be held later today by the highly-indebted Portuguese government have likely kept many market players on the sideline; nonetheless, in thin Asian trading, the Euro has managed to extend the gains from its earlier rebound.
As reported at 3:03 p.m. (JST) in Tokyo, the Euro was trading higher against the U.S. Dollar at $1.2983, a .1% gain and well off the session high of $1.3017; on Monday, the Euro struck a 4-month low, trading at $1.2860. The U.S. Dollar Index, a measure of the greenback’s strength versus major currencies, fell .2% to 80.63 .DXY; on Monday, the Dollar Index set a new 5-week peak of 81.313 .DXY.
The outcome of the €1.25 billion Portuguese bond auction is expected to be the deciding factor as to whether or not the government will seek financial assistance from the E.U./IMF.
Analysts expect that Portuguese debt will incur a premium of more than 7%, a cost that may not be sustainable in the long-term, and which would compel the government to forego private investment. At last week’s bond auction, it was only with intervention by the ECB that the yield was contained below 7% for 10-year notes.