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Euro steady after rally on ECB rescue hopes

July 27, 2012


Euros — File Photo
Euros — File Photo

TOKYO: The euro was steady against other currencies in Asian trade on Friday following a rally in New York after the head of the European Central Bank pledged to support the troubled currency.

The unit bought $1.2286 and 96.12 yen in Tokyo, a tad down from $1.2280 and 96.15 yen in New York late Thursday.

The dollar was changing hands at 78.22 yen against 78.29 yen.

ECB Chief Mario Draghi said Thursday the “ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough”.

The comments stoked speculation it will make further bond purchases to help bring down soaring state borrowing costs, particularly in Italy and Spain.

The euro would likely remain well-supported in Asia after “risk aversion fell away overnight”, said BNZ forex strategist Kymberly Martin in a note.

“In order for the current improved mood to be maintained, ECB words will need to be followed with action before too long,” Martin said.

“Next Thursday's ECB meeting looms large.”

The euro could be sold to new lows if next week's meeting comes and goes without any action, CitiFX said in a note.

“There remains a fair degree of scepticism among investors about whether and how they will move,” it said.

Japan's Finance Minister Jun Azumi on Friday welcomed Draghi's pledge if it leads to “more aggressive direct” steps for fiscally troubled countries such as Spain.

“The ECB under Draghi has already been acting quite aggressively, but there have been some issues such as the central bank's inability to directly offer funding for individual banks, such as Spanish banks,” Azumi said.

“From that perspective, I would like to welcome (the remarks) if he means to provide more aggressive direct support,” he told reporters.

Later in the day eyes will be on the United States, which is due to release second-quarter economic growth data, with dealers looking for signs for a fresh round of stimulus by the Federal Reserve.

The dollar was mostly lower against other Asia-Pacific currencies.

It fell to Sg$1.2517 from Sg$1.2563 on Thursday, to 55.56 Indian rupees from 56.08 rupees, to 1,139.68 South Korean won from 1,147.25 won, and to Tw$30.08 from Tw$30.15.

The greenback also fell to 41.93 Philippine pesos from 42.12 pesos and to 31.59 Thai baht from 31.69 baht while edging up to 9,485.00 Indonesian rupiah from 9,484.00 rupiah

The Australian dollar rose to $1.0416 from $1.0318 while the Chinese yuan was at 12.24 yen against 12.23 yen.