Monday in Asian deals, the euro plunged against its major counterparts as investors dumped the risk-sensitive common currency as worries about a potential debt crisis in Hungary rekindled concerns over the fiscal health of the European Union.
The euro tumbled to more than an 8- 1/2 -year low against the yen, fresh 4-year low against the dollar, new record low against the franc and a fresh 1- 1/2 -year low against the pound.
Concerns over Hungary’s finances, stoked Friday by a Hungarian official comparing the country’s problems to those of Greece, also continued to weigh on the euro.
Hungary isn’t a euro member. But debt problems there could hurt the common currency by highlighting the risk of sovereign downgrades in eastern Europe, where many euro-zone banks have investments.
Lack of any expression of strong concerns at a meeting of G20 finance ministers over the weekend or from euro zone policymakers after the euro’s fall below the 1.20 level against the dollar on Friday also prompted market players to intensify their sell-off of the euro.
U.S. and the European stocks closed sharply lower on Friday and the Asian stocks also tumbled today as investors were aggressively removing themselves from risk on a number of factors such as mounting worries about Hungary and the euro zone, disappointing U.S. jobs numbers and falling commodity prices.
Japan’s Nikkei 225 index fell 3.6%, Hong Kong’s Hang Seng slipped 2.4%, China’s Shangai composite index dropped 2%, South Korea’s Kospi declined 1.9%, Taiwan’s main index plunged 2.5%, Australia’s S&P 200 index slumped 2.8% and the All Ordinaries index was 2.7% lower.
The New Zealand stock market was closed today in honor of the Queen’s birthday.
Investors also dumped riskier assets such as the higher-yielding Australian and New Zealand dollars and unwound leveraged carry trades, moving funds to the U.S. dollar, the yen and the Swiss franc, which are considered as safe-haven assets in times of volatility.
The U.S. government’s May jobs report showed on Friday that the U.S. economy created 432,000 jobs last month, far fewer than the expected 500,000. Most of the jobs were temporary hiring by the government for the U.S. census.
The jobs data reinforced views the U.S. economic recovery may be slow, leading to a fresh bout of risk aversion.
The euro that fell below the 1.20 level against the dollar on Friday for the first time since March 2006 extended its slide in Asian deals on Monday. The euro-dollar pair slumped to a fresh 4-year low of 1.1878 in the Asian session. If the euro weakens further, it may likely target the 1.164 level. The pair that closed Friday’s New York session at 1.1982 is currently worth 1.1900.
The euro that soared to a record high of 1.6040 against the dollar on July 18, 2007 depreciated 23% thereafter and touched a 2-1/2 year low of 1.2331 on October 31, 2008. However, the euro-dollar recovered its losses in 2009 and gained more than 18% to reach a 15-1/2 month high of 1.5146 on November 25, 2009.
But the euro began declining in December last year and the Greek woes added to euro’s selling pressure this year. Thus far, the euro-dollar pair has lost more than 21% from a 15-1/2 month high.
During Asian deals on Monday, the euro slumped to more than an 8- 1/2 -year low of 108.10 against the yen. This may be compared to Friday’s close of 110.02. At present, the euro-yen pair is worth 108.50. The next downside target for the European currency is likely seen around the 100 level.
The euro-yen pair has lost 19% thus far this year.
The euro plunged to a new record low of 1.3855 against the Swiss franc in Asian deals on Monday.
The euro’s sharp slide against the franc fueled speculation that the Swiss National Bank may intervene later in the day to stop a further rise in the Swiss currency.
The euro that fell to a record low of 1.4005 against the franc on May 06 moved sideways in the subsequent days but surged up to more than a 2-month high of 1.4591 on May 21 as a dismal economic outlook report from Switzerland weakened the franc.
However, the euro pared its gains thereafter and broke the 1.4005 record low on June 04 and fell further below the 1.39 level. Thus far, the euro-franc pair has depreciated 5% from more than a 2-month high hit on May 21.
In Asian deals on Monday, the euro declined to a fresh 1- 1/2 -year low of 0.8242 against the pound. This may be compared to Friday’s close of 0.8275. If the euro drops further, it may likely target the 0.800 level.
The euro-pound pair has dropped more than 7% thus far this year.
Traders now look forward to the European session, in which the German factory orders for April and the Euro-zone sentix investor confidence for June are expected.
The U.S. consumer credit report for April has been slated for release at 3:00 pm ET.
The market’s near-term focus will be on comments from euro zone policymakers, with the euro now clearly in a downtrend, and how the European Central Bank will deal with the deepening euro debt crisis when it holds a policy-setting meeting later in the week.