HONG KONG, (Millat + APP/AFP) – The euro struggled
in Asia Wednesday on increasing uncertainty about France’s political outlook and fears of another debt crisis brewing in Greece.
Most major equities markets reversed early losses to push higher but
confidence remains shaky over worries about Donald Trump and uncertainty about
his impact on the global economy.
Wall Street continues to touch record highs on hopes Trump will enact
business-friendly measures. But Asian dealers are less sanguine following a
series of outbursts that have included warnings of protectionism and depictions
of Japan and China as trade cheats.
Against that background, traders are growing increasingly concerned about
rising populism across the world — particularly following Trump and Brexit —
with far-right presidential candidate Marine Le Pen echoing many of the
tycoon’s themes.
There are also elections in Germany, Italy and the Netherlands this year,
with similar issues in those countries fuelling fears the European Union could
break up.
The euro sank Tuesday to $1.0656, from highs above $1.08 at the start of
the week. It edged up slightly in Asia but was still under pressure.
“While it is premature to draw any definitive conclusion, the political
landscapes in both France and Italy are coming under immense scrutiny from
investors, which should keep euro upticks limited,” said Stephen Innes, senior
trader at OANDA.
“If we factor in a possibly divisive German election, risks are rising
immensely on the European political stage.”
Greece’s debt saga also reared its head after the International Monetary
Fund warned the country would likely not reach targets prescribed for it to
qualify for bailout cash.
– ‘Flash point’ –
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While Athens dismissed the report, the comments sent Greece’s cost of
borrowing soaring on bond markets and raised the spectre of another crisis for
the EU to juggle.
In Asia, Tokyo ended a volatile day 0.5 percent higher as early gains in
the yen abated, boosting Japan’s exporters.
Hong Kong ended 0.7 percent higher and Shanghai closed up 0.4 percent.
Both markets recovered from morning losses triggered by news that China’s
foreign exchange reserves fell below $3 trillion in January for the first time
in six years as it battled to support the yuan in the face of huge capital
outflows.
Analysts said that while the breach was not a big issue, the downward trend
was a worry.
“In the current context of President Trump threatening to declare China a
currency manipulator, and his clear desire for a weaker US dollar, China’s
reserves management and how that interplays with the (dollar-yuan) rate could
be another flashpoint between the world’s two biggest economies,” said Greg
McKenna, chief market strategist at FX and CFD provider AxiTrader.
Sydney edged up 0.5 percent. However, Seoul shed 0.5 percent, while
Singapore, Mumbai, Taipei, Manila, Jakarta and Kuala Lumpur also turned lower.
In early European trade London and Frankfurt were both flat while Paris
added 0.3 percent.
Oil prices extended losses after a reading showing US stockpiles soared
last week, leading to worries a government report later Wednesday will also
point to an increase.
However, the commodity pared initial drops after Qatar’s energy minister,
the current OPEC president, said world oil markets were “responding positively”
to output cuts implemented by the cartel and some non-cartel producers this
year.