Posted by Channel News Asia on 23 July 2012.
Asian markets tumbled and the euro slumped to its lowest level against the yen in almost 12 years on Monday as Spain's debt crisis deepened, raising concerns over the wider eurozone.
With borrowing costs hitting the danger levels that forced Ireland, Greece and Portugal to seek a bailout, investors are concerned that Spain, one of the eurozone's biggest economies, will also have to call for help.
Hong Kong led the losses, diving 2.63 percent by the break, while Tokyo shed 1.27 percent, Sydney slipped 1.70 percent, Seoul lost 2.09 percent and Shanghai slumped 2.11 percent.
Market players were spooked by reports that one of Spain's indebted regions, Valencia, would ask the central government for financial support, while officials in Madrid warned that the economy would likely contract through 2013.
"Europe is definitely a drag on risk assets again this week as investors are worried that Spain's debt burden could be bigger than expected and that a full bailout may be required," said Peter Esho at CityIndex in Australia.
The worries sent Spanish borrowing costs to a euro-era record level, with the 10-year bond yield climbing to 7.24 percent, while the euro at one point fell to 94.61 against the yen, its lowest level since November 2000.
In afternoon Tokyo trade the euro, which also tumbled Friday amid the Spanish woes, bought 94.70 yen, compared with 95.38 late Friday in New York.
"It's not the kind of situation where fears are just going to fade away, since the required amount of aid that Spain will need is likely to mount given the increasing needs of local governments," Rakuten Securities senior market analyst Masayuki Doshida told Dow Jones Newswires.
The euro tumbled below 95 yen for the first time in almost 12 years on Monday as dealers rushed to the safe-haven Japanese unit owing to growing fears about Spain's debt crisis.
The common currency dipped as low as 94.61 yen in morning Asian trade -- its lowest level since November 2000 -- from 95.38 in New York trade on Friday.
It was changing hands at 94.71 yen by 0430 GMT.
Investors must be ready for the euro's fall below 93.00 yen this week if the euro falls below US$1.18, said Atsushi Hirano, senior trader at Royal Bank of Scotland in Tokyo.
"We don't have much important economic indicators this week, so we'll pay attention to stock prices and headlines related to European debt problems," he said.
The euro was also weak against the dollar, treading around two-year lows at US$1.2115, while the dollar bought 78.16 yen.
The euro fetched US$1.2152 in New York trade Friday while the dollar was at 78.48 yen.
Dealers have been moving out of the euro after the borrowing costs on 10-year Spanish bonds soared to euro-era highs above seven percent, which is seen as unsustainable for the government to service.
With yields so high, unemployment at 24 percent and the economy expected to remain in recession throughout next year, analysts say Madrid will likely need a bailout on top of the one agreed for the country's banks last week.
No comments:
Post a Comment