By: Barbara Zigah
Risk averse investors pushed the Euro lower in Asian trading today, and the short term outlook for the common currency appears dependent on the Portuguese government’s approval (or not) of austerity measures legislation. As reported at 12:47 p.m. (JST) in Tokyo, the Euro was trading against the U.S. Dollar at $1.4165, sliding from the $1.4249 multi-month high struck yesterday. Some traders see a possible slide of the Euro to below $1.41 if the Portuguese government fails to approve austerity measures. The government has been adamantly denying that the nation needs bail-out assistance from the joint E.U./IMF mission; clearly, today’s vote will be critical to Portugal’s economic survival.
Nonetheless, some economists don’t see the Euro being put under too much pressure, especially given the stance of the ECB’s president, Jean-Claude Trichet, who has reiterated that a rate hike, supportive of the currency, would likely be forthcoming. The relative softness of the U.S. Dollar is also providing a yield advantage to the common currency as well as some cushion.
Also in Asia, the Japanese Yen slipped against the U.S. Dollar to 80.90 Yen, as investor caution appears to be the watchword following the G7’s threat of joint intervention. Traders are wary that intervention will occur below the 80.50 Yen price, exactly where the Japanese central bank first intervened.