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The Euro falls as the Europe braces for the crunch

Mon, Oct 6 2008, 11:42 GMT
by Benny Menashe

Finotec Group Inc.

The euro fell against the greenback and the weakest in two years versus the yen as the deepening credit crisis prompted European governments to pledge bailouts for troubled banks. The Euro declined for a sixth day against the Dollar as Germany joined with banks and insurers to prevent the collapse of property lender Hypo Real Estate Holding AG and Belgium announced a revised deal to salvage Fortis, the nation's largest financial-services company. ``We have to be wary of further financial stress in the euro zone because these governments may have to rescue more of their banks,'' said Osamu Takashima, chief analyst for global market sales and trading in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan's largest publicly listed bank. ``The euro is in a long-term downturn.'' The EUR/USD is currently trading at $1.3585 as of 7:30am, GMT.

The Sterling tumbled against the dollar amid speculation the Bank of England will cut interest rates this week to bolster the economy that may be in a recession. Bank of England policy makers will probably cut the benchmark interest rate by a quarter-percentage point to 4.75 percent when they meet on Oct.9, according economists and traders. Reports last week showed manufacturing contracted, home values plunged and banks planned to scale back loans. The government seized mortgage lender Bradford & Bingley Plc as the credit crisis deepened. The GBP/USD is currently trading at $1.7587 as of 7:43am, GMT.

Japan's currency was the best-performer last month and the only currency to appreciate against the dollar. Deutsche Bank AG, the biggest trader of foreign exchange, says the yen will rise 5 percent in coming months. New York-based Morgan Stanley is telling clients to buy the currency versus the euro and pound. ``We are in a multi-year trend reversal,'' said Paresh Upadhyaya, a senior vice president at Putnam Investment LLC in Boston who helps manage $50 billion in currency assets. ``We are going to see a global central bank easing cycle. The yen is the place to be in this environment of economic slowdown and heightened volatility.'' The USD/JPY is currently trading at 103.70 as of 7:52am, GMT.

Today's Economic Events

Published on  Mon, Oct 6 2008, 11:45 GMT