Japanese Investors Seek High Yielding Assets and Currencies
The US dollar has hit a seven month high vs. the Japanese yen after Japanese investors moved funds abroad to higher yielding assets. The dollar also gained against the euro in advance of a US jobs report which is expected to show that US employers added 160,000 jobs in March. Some believe the strong jobs data could prompt the Federal Reserve to raise rates although Fed officials have repeatedly said that rates will remain low for an “extended period.” The US jobs report will be released Friday, April 2nd. Europe and Asia posted strong manufacturing data lifting risk appetite in equity and currency markets. Matthew Strauss of RBC Capital Markets stated, “We had a slew of nice upside surprises from manufacturing data in China, Europe, the UK … so that’s a good start to the month, and if we get a good payrolls number tomorrow, that’s a dollar-positive.”The dollar gained 0.3% against the yen trading at 93.74 yen. The euro slipped 0.2% vs. the dollar to $1.3489.
Euro Pressured Despite EU, IMF Agreement
Concerns about Greece’s debt crisis linger even after last week’s agreement by the EU and the IMF to provide the debt ridden nation with a safety net. The plan has failed to reduce borrowing costs for the Athens government. Increased borrowing costs mean that the EU leaders may have to implement the rescue mechanism the details of which remain unclear. Such a move would force EU leaders to decide what role the International Monetary Fund would play in any Greek aid package. The move would also put German Chancellor Angela Merkel in a difficult political position in Germany where opposition to any taxpayer funded bailout of Greece is widespread. Phyllis Reed of Kleinwort Benson stated, “What they were hoping for was to set up some sort of arrangement that never has to be used. The markets have sniffed that out and it seems like we’re heading back to square one.”
Many Pessimistic About Greece’s Prospects
The rescue mechanism which is a combination of EU and IMF bilateral loans can only be triggered if the Athens government runs out of funding options. Greek Prime Minister George Papandreou must raise about 11.6 billion Euros by May’s end said the agreement was “very satisfying.” Many remain pessimistic about Greece’s prospects. Razeen Sally of the London School of Economics said, “Markets don’t believe that Greece will be able to see things through.” Trading will likely be thin in advance of the weekend Easter holiday.
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