The euro edged lower against the US dollar in Asia yesterday amid mounting speculation the European Central Bank (ECB) would start buying sovereign bonds, analysts said.
The euro bought US$1.2055 in afternoon Singapore trade — near two-year lows — from US$1.2097 in New York on Wednesday before the New Year break.
The single currency stood at ¥145.09, up from ¥144.87. The US dollar was at ¥120.42 compared with ¥119.76 in US trade and ¥119.66 in Asian trade on Wednesday.
On stock markets, Asian equities started the year on an upswing, mostly rising in limited trading yesterday, with many regional bourses still closed for public holidays.
Shares in Hong Kong were up 1.1 percent, adding 252.78 points to 23,857.82.
Seoul was flat, edging up 10.85 points to 1,926.44, while Sydney was up 0.5 percent, or 24.93 points, at 5,435.93.
Singapore was little changed, up 5.44 points to 3,370.59.
Markets in Taiwan, China, Japan, New Zealand, the Philippines and Thailand were closed yesterday for holidays.
In an interview published yesterday, ECB president Mario Draghi said the central bank’s governing council was “unanimous” that the bank would intervene to prevent the 19-nation bloc from slipping into deflation.
“We are in technical preparations to adjust the size, speed and compositions of our measures in early 2015, should it become necessary to react to too long a period of low inflation,” Draghi was quoted as saying by German financial newspaper Handelsblatt.
The ECB has already used several tools to push inflation in member nations back up to the 2.0 percent annual rate it regards as healthy, including asset purchases and making cheap loans available to banks.
It is also examining the possibility of large-scale purchases of sovereign debt — so-called quantitative easing (QE) — to help jump-start the EU’s moribund economy.
If the eurozone fell into deflation, it would create a dangerous downward spiral of falling prices that can strangle economic growth and drain government coffers.
London-based Spotlight Ideas managing partner Stephen Pope said Draghi would have his work cut out amid concerns by “hardliners” that “QE is a backdoor to sovereign state financing” and “the notion that the ECB will act as buyer” of debt from eurozone nations that have refused economic reforms.
“I fully expect to see explicit measures that will limit credit risk by suggesting that only the highest quality bonds be acquired,” Pope said in a commentary.
The decisionmaking ECB council meets next on January 22.
Meanwhile, oil prices were up yesterday, with US benchmark West Texas Intermediate for delivery next month rising US$0.80 to US$54.07 and Brent crude for next month gaining US$0.71 to US$58.04 in mid-morning trade.
“The gains in Asian trading are likely because of the positive US crude stockpiles data released on Wednesday,” said Daniel Ang, an investment analyst at Phillip Futures in Singapore.
US crude reserves fell by 1.8 million barrels in the week to Dec. 26, the US Energy Information Administration said in its last petroleum report for last year released on Wednesday, boosting prices that lost nearly half their value in the second half of the year.
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