Positive Asian Data Lifts Euro

The US dollar fell against the euro and other major currencies as risk sentiment improves among traders and investors. Positive economic data from Japan and Australia and rising Asian stocks lifted risk appetite prompting slight euro gains. Many expect the Euro’s gains to be short lived unless Greece provides more details on proposed austerity measures before the nation’s bond issue next week. Risk sentiment was lifted by an increase in Japanese industrial production and strong gains in Australian private sector credit. Markets are waiting for the results of a meeting of the G 20 nations to take place in South Korea this weekend.

Germany May Purchase Greek Bonds

The euro posted slight gains on the US dollar after German officials said that Germany may purchase Greek bonds through the government owned KFW group. Fabian Eliasson of Mizuho Corporate Bank Ltd stated, “This was the first specific bit of news that Europe will give some support financially to Greece. There have been talks but no promises. The market was oversold in euros. Something like this comes out and people are reacting to the news.” The euro gained 0.5% trading at $1.3617 up from $1.3548 Thursday. The euro gained 0.3% vs. the yen trading at 121.01 yen. This month the euro has lost 1.8% vs. the dollar and 3.4% against the yen. German owned KFW group is preparing a plan to grant Greece 25 billion euros ($34 billion USD) if needed. Robert Lynch of HSBC Holdings Plc in New York stated, “If Germany is leading this effort that’s a more credible process from a markets perspective than if other smaller powers were leading it. There is a perception that if there is an EU effort to support Greece, Germany needs to lead that effort or it won’t take place.” Germany is the euro zone’s largest and strongest economy.

BOE Says Further Emergency Measures May be Needed

Greek Prime Minister George Papandreou told the BBC that Greece needs 53 billion euros this year and by May faces bond redemptions of 20 billion euros. He also said that Greece has enough cash to last until the middle of March. Currency experts say that the euro is vulnerable due to concerns about the fiscal health of several EU nations. The pound fell 1.7% against the euro trading at 89.42 pence the largest decline since September 15th 2009. Bank of England policymakers said that further emergency measures may be required to bolster the nation’s declining economy. Lane Newman of ING Groep NV stated, “Right now sterling is weakest out of the G10. Regardless of what the market thinks, reserve managers would rather hold euro over sterling. The U.K. arguably has bigger problems than the euro zone.”