Things couldn’t be better in the Eurozone, where 93.5% of the region is on a sufficiently robust upswing that the central bank has seen fit to call a start to a new monetary tightening cycle. Even the Dalai Lama has brought smiles to Irish folk despite the bitter aftertaste of a bailout from its neighbors. The banned Tibetan spiritual leader was welcomed by sellout crowds across the Emerald Isle as he encourages them no “forgive but not forget” the policies of its European cohorts. Meanwhile a fresh wave of nervousness drove vulnerable European nations’ bonds in to the ground forcing yields to a record high. Talk of a restructuring of peripheral nations’ debt reminded currency investors that those economies might comprise a mere 6.5% of total GDP within the Eurozone, but they account for 100% of the euro’s recent woes.
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Euro – You just never know when the thorny sovereign debt issue is likely to resurface again, and like a baseball steroid saga, the problem seems destined to never go away. In recent weeks it became apparent that EU ministers were reaching similar conclusions about what steps were necessary and what agreements should be put in place in dealing with deficit laden reprobates. But as many have promised the issue of bond holder losses is again plaguing the markets. Greek Prime Minister Papandreou recently said that no restructuring was necessary for his nation’s debt, but that’s not the view of influential German Finance Minister Wolfgang Schaeuble who today told Die Welt newspaper that a forthcoming audit in June might leave Greece unable to make debt repayments. If that transpires, Mr. Papandreou will need to negotiate with its creditors. The euro slumped across the desk in lunchtime trading in Frankfurt as dealers took pot shots and almost slashing two full cents off the value of the single currency. Earlier the unit bought $1.4515 before the story broke creating a surge in peripheral bond yields and a slide in the euro, which hit $1.4365.
Japanese yen – The yen found its way back to ¥83.00 against the dollar overnight as lingering concerns over global growth caused by warnings over rampant commodity prices kept up demand for the yen. Its safe haven status is currently questionable in the aftermath of the natural and resultant nuclear disasters that drove the Bank of Japan to request coordinated efforts to stem a crippling rise in the yen. The yen made sharper gains against the single currency, which slid to ¥119.43. Against the pound the Japanese unit rallied to ¥135.50.
Canadian dollar – The recent slide in the price of crude oil alongside other prices for key commodities was tempered by a midweek retail sales report out of the U.S. showing only modest impact on consumption. The commodity currencies were perhaps too quick to dispel economists’ warnings and staged a speedy rebound. However, it looks like yet another warning from leaders of so-called BRIC nations is making dealers think twice about the longevity of the super-cycle for commodities. The loonie is off sharply against the greenback on Thursday and fell to as low as $1.0331 U.S. cents from a midweek close at $1.0376. Later on Thursday Canada produces a manufacturing sales report covering February with dealers expecting a decline of 0.5% after a strong 4.5% rebound to start the year. The Bank of Canada warned earlier in the week over the impact of a raging currency on export growth. The report may be a little dated but will likely refresh investors’ minds over the fact that the unit has been north of parity ever since the start of February.