The euro fell sharply in London yesterday against the dollar as investors scaled back expectations for far-reaching economic reform in Germany under a left-right coalition headed by Angela Merkel.
The single European currency in late-day trade was at US$1.2055 against US$1.2125 late Friday in New York.
The greenback was trading at ¥114.28 after ¥113.78 on Friday.
The euro had initially gained on news that the political stalemate in Germany was over and that Merkel would replace Chancellor Gerhard Schroeder.
But unease was generated by news that Schroeder's Social Democrats would have more Cabinet posts than Merkel's Christian Democrats, including the foreign, finance, justice and labor ministries.
As a result, doubts were raised on the market on whether the "grand coalition" between the two parties will lead to substantive reforms that would lift economic growth.
"That's quite a price for the [Christian Democrats] to pay," said Hans Redeker, global head of forex strategy at BNP Paribas.
Uncertainty over the composition of the new government has dogged the euro since the tight Sept.18 election, which led to both Schroeder and Merkel laying claim to the post of chancellor. The German political situation was one of the reasons behind the euro's fall to near three-month lows.
Underlying dollar strength has also played its part, and most analysts predict that upcoming US economic news will provide the greenback with further support.
They said the dollar, which has risen over 10 percent against the euro this year, could be buoyed further this week by US inflation and retail sales data -- although yesterday's US trade numbers will have to be overcome first.
But whatever happens on the trade front, the market is of the opinion that the US Federal Reserve remains on course to raise the cost of borrowing again at its next meeting on Nov. 1, especially after last Friday's better-than-expected US jobs data for last month.
The Fed raised its key Fed funds rate a quarter point for the 11th consecutive time last month to 3.75 percent, and indicated that the US economy was on a steady growth track despite the impact of Hurricane Katrina.
"The dollar continues to build on recent gains after further comments from the Fed at the end of last week suggested once again that there's going to be no let-up in the hawkish stance over interest rates," said Paul Jackson, currency dealer with CMC Group.
"Oil prices are also retreating and although we're still holding clear of the US$60-a-barrel level ... this starts to remove some of the pressures associated with the wider trade deficit," he said.
Elsewhere, analysts said the pound might enjoy some respite this week, especially if yesterday's trade data continues to show an improving trend and today's earnings news shows pay pressures mounting.
Sterling has suffered heavily recently from the perception that British monetary policy was set to diverge markedly from that in the US and the eurozone.
The market remains split on the prospect of another quarter point rate cut from the Bank of England next month, which would take the key repo rate down to 4.25 percent.
NEXT GENERATION: The four plants in the Central Taiwan Science Park, designated Fab 25, would consist of four 1.4-nanometer wafer manufacturing plants, TSMC said Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) plans to begin construction of four new plants later this year, with the aim to officially launch production of 2-nanometer semiconductor wafers by late 2028, Central Taiwan Science Park Bureau director-general Hsu Maw-shin (許茂新) said. Hsu made the announcement at an event on Friday evening celebrating the Central Taiwan Science Park’s 22nd anniversary. The second phase of the park’s expansion would commence with the initial construction of water detention ponds and other structures aimed at soil and water conservation, Hsu said. TSMC has officially leased the land, with the Central Taiwan Science Park having handed over the
The Philippines is working behind the scenes to enhance its defensive cooperation with Taiwan, the Washington Post said in a report published on Monday. “It would be hiding from the obvious to say that Taiwan’s security will not affect us,” Philippine Secretary of National Defense Gilbert Teodoro Jr told the paper in an interview on Thursday last week. Although there has been no formal change to the Philippines’ diplomatic stance on recognizing Taiwan, Manila is increasingly concerned about Chinese encroachment in the South China Sea, the report said. The number of Chinese vessels in the seas around the Philippines, as well as Chinese
AUKUS: The Australian Ambassador to the US said his country is working with the Pentagon and he is confident that submarine issues will be resolved Australian Ambassador to the US Kevin Rudd on Friday said that if Taiwan were to fall to China’s occupation, it would unleash China’s military capacities and capabilities more broadly. He also said his country is working with the Pentagon on the US Department of Defense’s review of the AUKUS submarine project and is confident that all issues raised will be resolved. Rudd, who served as Australian prime minister from 2007 to 2010 and for three months in 2013, made the remarks at the Aspen Security Forum in Colorado and stressed the longstanding US-Australia alliance and his close relationship with the US Undersecretary
‘WORLD WAR III’: Republican Representative Marjorie Taylor Greene said the aid would inflame tensions, but her amendment was rejected 421 votes against six The US House of Representatives on Friday passed the Department of Defense Appropriations Act for fiscal 2026, which includes US$500 million for Taiwan. The bill, which totals US$831.5 billion in discretionary spending, passed in a 221-209 vote. According to the bill, the funds for Taiwan would be administered by the US Defense Security Cooperation Agency and would remain available through Sept. 30, 2027, for the Taiwan Security Cooperation Initiative. The legislation authorizes the US Secretary of Defense, with the agreement of the US Secretary of State, to use the funds to assist Taiwan in procuring defense articles and services, and military training. Republican Representative
RSS