Euro hovers near two-month lows on eurozone fears
The euro hovered near two-month lows in Asian trade Monday, giving back earlier gains following news of Ireland's 85 billion euro (113 billion dollar) bailout and amid lingering fears for other nations.world Updated: Dec 01, 2010 08:48 IST
The euro hovered near two-month lows in Asian trade on Monday, giving back earlier gains following news of Ireland's 85 billion euro (113 billion dollar) bailout and amid lingering fears for other nations.
The single currency slipped to 1.3181 dollars Monday, its lowest level since late September, before rebounding above 1.32 dollars in a volatile session.
The unit had earlier risen to 1.3291 dollars after debt-ridden Ireland said it will receive an 85-billion-euro package from the European Union and the International Monetary Fund.
"The impact on the EUR was stark, with the currency swinging in a 120 point range and failing to hold its initial rally following the announcement," noted Mitul Kotecha of Credit Agricole.
But persistent fears that Spain and Portugal could be the next nations in line for a rescue hit sentiment. The euro's direction during later London trade will set the tone for the major currency pairs, Auckland-based HiFX Senior Trader Stuart Ive told Dow Jones Newswires. "At the end of the day markets are still very, very interested in what's happening with Portugal and Spain as well," he said.
"Whilst Ireland and Irish banks may have settled down, there are still concerns surrounding those other two nations." Against the yen, the euro also slipped to 111.19 from 111.30 in Friday US trade.
Europe on Sunday agreed a bailout for Ireland and new rules for future rescues which, under stringent IMF terms, would hit government bond investors.
Finance ministers sealed the 113-billion-dollar agreement at emergency talks in Brussels timed in an attempt to reassure Asian financial markets before they reopened early Monday.
Under the deal, Ireland's crippled banks will immediately receive 10 billion euros but will be subject to a "fundamental downsizing," the government in Dublin said.
The banks will be able to draw on a total of 35 billion euros (46.5 billion dollars) out of 67.5 billion euros in external aid from the European Union and the International Monetary Fund. But the first 17.5 billion comes from an Irish "treasury cash buffer and investments of the National Pension Reserve Fund," an EU statement said, prompting criticism from opposition parties in Ireland.
Irish Prime Minister Brian Cowen insisted he had got "the best deal available" for Ireland and its people, a day after mass street protests in Dublin against austerity cutbacks. As part of the deal, Ireland was given an extra year, until 2015, to bring the 2010 deficit of 32 percent of GDP back within the permitted three percent limit.
Brussels said it would also "examine the necessity" of re-scheduling repayments on Greece's 110-billion-euro loans, as part of broader moves to convince bond buyers to keep interest rates at manageable levels. Greece was the first recipient of a major EU-IMF bailout earlier this year.
First Published: Nov 29, 2010 08:36 IST