By Ron Harui and Yasuhiko Seki
Feb. 18 (Bloomberg) -- The euro traded near a 10-week low against the dollar on concern the region’s banks will disclose increasing losses due to the deepening financial crisis in central and Eastern Europe.
The European currency may weaken for a third day versus the greenback on speculation Commerzbank AG, Germany’s second- largest bank, and ING Groep NV, the biggest Dutch financial company, will report combined losses of more than 4 billion euros ($5 billion) when they release earnings today, according to Bloomberg News surveys. The yen may gain for a third day against the euro on the prospect that stock declines will spur investors to sell higher-yielding assets.
“Worries are mounting over the financial situation in central and eastern Europe, especially about countries that have large exposure to those regions,” said Akifumi Uchida, deputy general manager of the marketing unit in Tokyo at Sumitomo Trust & Banking Co., Japan’s fifth-largest bank. “The euro is likely to depreciate” to $1.25 and 115.50 yen today, he said.
The euro traded at $1.2583 as of 2:33 p.m. in Tokyo from $1.2582 late in New York yesterday. It earlier touched $1.2559, the lowest level since Dec. 4. The currency was at 116.25 yen from 116.27 yen, and at 88.44 British pence from 88.37 pence.
The dollar was at 92.43 yen from 92.41 yen yesterday when it reached 92.75 yen, the strongest since Jan. 8. It traded at $1.4231 versus the pound from $1.4238, and was at 1.1696 Swiss francs from 1.1694. The yen advanced 0.8 percent to 15.88436 versus South Korea’s won, and climbed 0.2 percent to 2.668 against Taiwan’s dollar.
Dollar Index
The ICE’s Dollar Index, which tracks the greenback versus the euro, yen, pound, Canadian dollar, Swedish krona and Swiss franc, rose to 87.746 from 87.581 yesterday when it reached 87.864, the highest level since Nov. 21. The index gained 7.9 percent this year.
The euro may fall as Frankfurt-based Commerzbank probably had a net loss of 851 million euros last quarter, according to the median estimate of analysts surveyed by Bloomberg before today’s announcement. That compares with net income of 201 million euros a year earlier. ING Groep, which also releases fourth-quarter earnings today, forecast last month it will make a preliminary pretax loss of 3.3 billion euros, because of writedowns on mortgage securities, debt and equities.
“Investors are keen to know how the spreading economic woes in neighboring countries will affect the earnings of European financial institutions, which are already saddled with heavy credit losses,” said Takashi Kudo, director of foreign- exchange sales in Tokyo at NTT SmartTrade Inc., a unit of Nippon Telegraph and Telephone Corp. “Growing uncertainties about the financial system in Europe may continue to pose downside risks to the euro.”
Moody’s Report
Moody’s Investors Service said yesterday it may cut the ratings of several banks with units in eastern Europe, adding to concern financial turmoil in the region will deepen. Eastern European banks, which are mainly subsidiaries of financial institutions such as Vienna-based Raiffeisen Zentralbank Oesterreich AG and Stockholm-based Swedbank AB, are likely to come under “downward pressure” that may weaken their parent companies, Moody’s said.
Poland’s zloty declined 0.3 percent to 4.9161 per euro and weakened 0.3 percent to 3.9065 against the dollar. The currency reached 4.9307 versus the euro yesterday, near the all-time low touched in March 2004.
Demand for the yen may increase after Asian equities fell. The Nikkei 225 Stock Average slipped 1.5 percent and the MSCI Asia-Pacific Index of regional shares weakened 1.2 percent, prompting investors to reduce holdings of higher-yielding assets.
Repatriation Flows
“We continue to think that dollar-yen will decline below 90 over the coming three months, mainly because of repatriation by Japanese institutional investors toward the Japanese fiscal year-end,” analysts led by David Woo, London-based global head of foreign-exchange strategy at Barclays Capital, wrote in a research note today.
The VIX volatility index, a Chicago Board Options Exchange gauge reflecting expectations for stock price changes that’s used as a measure of risk aversion, rose 13.35 percent, the most since Jan. 20, to 48.66 yesterday.
Losses in the euro may be tempered on speculation the currency’s 1.7 percent decline against the dollar yesterday was excessive, according to Minoru Shioiri, senior manager of currency trading at Mitsubishi UFJ Securities Co. in Tokyo.
The euro’s 14-day stochastic oscillator, a technical indicator that measures momentum, was about 5 today, according to data compiled by Bloomberg. A level below 20 suggests a currency may have weakened too quickly and is poised to rebound.
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Yasuhiko Seki in Tokyo at yseki5@bloomberg.net.
Posts
No comments:
Post a Comment