Euro plunges vs yen on worries about EU unity

By Gertrude Chavez-Dreyfuss

NEW YORK (BestGrowthStock) – The euro on Thursday fell to its lowest against the yen since November 2001 as investors fretted about a seeming lack of unity among euro zone leaders in addressing the region’s debt crisis.

Worries about the euro zone spooked investors in global stock and commodity markets as well, fuelling a surge in the yen and U.S. dollar as safe havens. There was a flight from currencies that benefit from increased risk appetite such as the Australian, Canadian, and New Zealand dollars.

“Every European Union member has a central banker and a finance minister and all are opening their mouths. But unfortunately, there is no coordinated response to this crisis and this has hurt the euro,” said Ron Simpson, director of currency research at Action Economics in Tampa, Florida.

The discord has been most apparent the last two days when German Chancellor Angela Merkel said on Wednesday that the euro is in danger. “Every one of us here can tell that the currency crisis in the euro is the greatest challenge that Europe has faced (in) decades,” Merkel said.

That was a statement that didn’t sit well with French Economy Minister Christine Lagarde, who said on Thursday she does not agree with Merkel’s view. “I absolutely do not think the euro is in danger, The euro is a solid and credible currency.

Japan and the United States have economic problems of their own. But their relatively stable financial systems make the dollar and yen attractive to investors fleeing risk in Europe.

In early afternoon trading, the euro rose 0.5 percent at $1.2490, touching session peaks at $1.2511 on EBS trading platform and intra-day lows at $1.2296.

A trader said there was a large euro order in the afternoon session of more than $400 million at $1.2440, which propelled the single currency higher. Markets then took out stop losses after the $1.2440 level was hit.

INTERVENTION UNLIKELY?

The euro had recovered from four-year lows on Wednesday as traders covered short positions on speculation European monetary officials might act to check its rapid fall. For now, market players see intervention unlikely.

Eurogroup Chairman Jean-Claude Juncker said on Thursday he did not see a need to take immediate action to halt the euro’s decline. This was echoed by European Union Competition Commissioner Joaquin Almunia who said there was no need to intervene.

Action Economics’ Simpson said despite concerns about the euro, the single currency was able to hold above $1.2300 and this he attributed to a less upbeat view on the U.S. economy.

In fact, data showed on Thursday that the number of U.S. workers filing new applications for unemployment insurance unexpectedly rose last week for the first time since early April. The report added to the market’s risk aversion.

“U.S. economic data has not been as good as those in the first quarter. That kind of kept the dollar under pressure which is probably the reason why euro/dollar didn’t collapse to test the trend lows from (Wednesday),” said Action’s Simpson.

The dollar was down around 1.9 percent against the yen at 89.88 yen. The low-yielding Japanese currency also surged against the euro, which plunged 1.4 percent to 112.30. At one point, the euro slipped to the lowest against the yen since November, 2001, according to Reuters data.

In other European news, the euro got a bid after Swiss National Bank Vice Chairman Thomas Jordan said Switzerland can cope with a stronger currency in the longer term though the SNB is for now countering an excessive rise in the franc to prevent deflation risks.

The euro last traded at 1.4369 Swiss francs, up 0.6 percent on the day.

The Australian dollar came under further heavy selling pressure versus the U.S. dollar and the yen in particular.

The Aussie, traded down around 2.7 percent versus the U.S. dollar at US$0.8248 after falling to a ninth-month low at US$0.8153.

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(Reporting by Gertrude Chavez-Dreyfuss; Editing by Andrew Hay)

Euro plunges vs yen on worries about EU unity