The US dollar and Japanese yen rose against their major opponents on Tuesday morning in Asia as most Asian stocks tumbled, driven by the continued concerns over the euro-zone debt worries, prompting traders to seek safe-haven currencies.
The dollar and the yen often strengthen in times of economic uncertainty as investors opt for low yielding currencies.
The greenback jumped to a new multi-month high against the Swiss franc and multi-day highs against the pound and the euro. At the same time, the yen soars to multi-day highs against most majors.
Amid mounting concerns over Europe’s debt worries, the Japanese stock market opened weak today and the benchmark Nikkei 225 index has now plunged to its lowest level in more than five months, with stocks across various sectors posing sharp losses.
The weak close on Wall Street overnight, despite encouraging home sales data, is also contributing to the decline. The benchmark Nikkei 225 index fell 231.73 points to 9,526.67, its lowest since early December.
The prospect of the Greek debt contagion spreading to Spain and Portugal remained on traders’ minds, raising fears that the global economic recovery could be derailed without much participation from Europe.
Over the weekend, the Spanish government stepped in to save a regional savings bank, further undermining confidence in the stability of European financials.
The International Monetary Fund supported Spain’s plans to rein in its budget deficit with the deepest spending cuts in three decades. However, the IMF urged Spain to take further steps to overhaul its ailing banks, adding to speculation financial institutions in the area face more losses.
The greenback touched its strongest level in more than 13 months against the Swiss franc on Tuesday in Asia, rising to as high as 1.1624 around 9:00 pm ET. The greenback-franc pair then moved in a sideways pattern and is currently stabilized around 1.1613 and if it strengthens further, 1.1720 is seen as the next likely resistance level. The pair closed trading at 1.1720 in late New York Monday.
The dollar advanced to a 6-day high of 1.2284 against the euro and a 4-day high of 1.4339 against the pound at this time and this may be compared to yesterday’s closing quotes of 1.2372 and 1.4428, respectively. On the upside, the greenback may target resistance levels at 1.2090 against the common currency and 1.4240 versus the alpine unit.
The yen advanced to a 5-day high of 110.57 against the euro around 9:00 pm ET, compared to 111.71 hit late New York Monday. The euro-yen pair is presently worth 110.96 with 107.0 seen as the next likely target level.
The yen climbed to a 4-day high of 129.11 against the pound and 77.47 against the Swiss franc by 9:00 pm ET and the next likely resistance levels are seen at 126.50 and 77.0, respectively. The yen closed yesterday’s deals at 77.91 against the Swiss franc and 130.28 against the pound.
The Japanese currency also soared to a 4-day high of 60.11 against the New Zealand dollar and 84.23 against the Canadian dollar at this time and this may be compared to yesterday’s closing quotes of 60.45 and 85.0, respectively. If the yen strengthens further, it may find resistance levels at 59.90 against the kiwi and 83.70 versus the loonie.
The yen also moved in an upward channel against the currencies of the U.S. and Australia at this time, rising to as much as 89.98 and 73.65, respectively. The yen that closed yesterday’s deals at 90.29 against the greenback and 74.65 versus the aussie is currently quoted at 90.13 and 74.07, respectively.
Traders are now looking forward to the European sessio, in which the Swiss UBS consumption indicator for April, Italian consumer confidence for May and retail sales for March, UK’s first quarter GDP and the euro-zone industrial new orders data for March have been slated for release.
Across the Atlantic, S&P/Case-Shiller home prices for March, consumer confidence data and the Richmond Fed’s manufacturing index-both for May are expected in the North American session.