The euro has dropped to yet another record low in European trading, pushed lower today by the disappointing
survey of business confidence from Germany.
The Ifo index for August fell for the third time in a row to 99.0 from 99.1 in July. Most economists had expected a modest tick up in the index, which is regarded as a leading indicator of both German and euro zone economic performance. The impact of recent oil price increases was blamed for the dip.
There was 0.3% increase in Italian
for the second quarter. An increase of 0.7% had been expected, so this was also a disappointment.
The euro slipped to lows of $0.8440, compared with last night's low of $0.8470.
This weekend's G7 meeting in Prague of the leading industrial countries is expected to discuss the euro, but it may not be able to accomplish much. " It's the same old story," said Audrey Childe-Freeman of
CIBC World Markets
in London. "The market is increasingly confident that we're not going to see any intervention after the G7."
International Monetary Fund's
Horst Koehler noted the euro's weakness. "There is no doubt ¿ the euro is undervalued, heavily undervalued," he said in a news conference ahead of the G7 meeeting. "In my view it is also clear that intervention cannot be taboo."
Dollar/yen is opening weaker at 106.55. As the euro loses ground, the euro/yen relationship has pushed almost 1% lower to open at 90.25.
Selling euros and buying yen has been one of the most profitable forex trades this year. That may be driven as much by sentiment as by economic logic. "I can't buy the argument on euro/yen. The Japanese economy is not recovering at all, and the euro/yen story from a fundamental standpoint is completely unjustified, " Childe-Freeman said.
Sterling is firmer against the dollar at $1.4145, and is solidly stronger against the euro at 59.85 pence. The latest
Bank of England
Monetary Policy Committee minutes show that last month's vote in favor of leaving interest rates unchanged was only 5 to 4, suggesting that further rate rises are possible.
Dollar/Swiss franc is again firmer at 1.7850. The euro is weaker against the Swiss franc and hit another record low of SF1.5065 this morning.
The Canadian dollar is slightly firmer at C$1.4800.
In the home of the
summer Olympics, the Australian dollar is opening at new record lows around $0.5400. Analysts now see the possibility of dramatic further declines in the Aussie, towards $0.50.
The New Zealand dollar is also lower at $0.4090.
South Asian currencies are consistently weak against the dollar. Today, the Indonesian rupiah is trading at 8,770/dollar, R100 lower than yesterday. Political tensions are adding to the problems created by a strong dollar, keeping the rupiah under pressure.
The Polish zloty is still soft at 4.60/dollar, as its tie to the euro keeps the downward pressure in place.
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