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.
RESPONSE: The transit sends a message that China’s alignment with other countries would not deter the West from defending freedom of navigation, an academic said Canadian frigate the Ville de Quebec and Australian guided-missile destroyer the Brisbane transited the Taiwan Strait yesterday morning, the first time the two nations have conducted a joint freedom of navigation operation. The Canadian and Australian militaries did not immediately respond to requests for comment. The Ministry of National Defense declined to confirm the passage, saying only that Taiwan’s armed forces had deployed surveillance and reconnaissance assets, along with warships and combat aircraft, to safeguard security across the Strait. The two vessels were observed transiting northward along the eastern side of the Taiwan Strait’s median line, with Japan being their most likely destination,
GLOBAL ISSUE: If China annexes Taiwan, ‘it will not stop its expansion there, as it only becomes stronger and has more force to expand further,’ the president said China’s military and diplomatic expansion is not a sole issue for Taiwan, but one that risks world peace, President William Lai (賴清德) said yesterday, adding that Taiwan would stand with the alliance of democratic countries to preserve peace through deterrence. Lai made the remark in an exclusive interview with the Chinese-language Liberty Times (sister paper of the Taipei Times). “China is strategically pushing forward to change the international order,” Lai said, adding that China established the Asia Infrastructure Investment Bank, launched the Belt and Road Initiative, and pushed for yuan internationalization, because it wants to replace the democratic rules-based international
ECONOMIC BOOST: Should the more than 23 million people eligible for the NT$10,000 handouts spend them the same way as in 2023, GDP could rise 0.5 percent, an official said Universal cash handouts of NT$10,000 (US$330) are to be disbursed late next month at the earliest — including to permanent residents and foreign residents married to Taiwanese — pending legislative approval, the Ministry of Finance said yesterday. The Executive Yuan yesterday approved the Special Act for Strengthening Economic, Social and National Security Resilience in Response to International Circumstances (因應國際情勢強化經濟社會及民生國安韌性特別條例). The NT$550 billion special budget includes NT$236 billion for the cash handouts, plus an additional NT$20 billion set aside as reserve funds, expected to be used to support industries. Handouts might begin one month after the bill is promulgated and would be completed within
The National Development Council (NDC) yesterday unveiled details of new regulations that ease restrictions on foreigners working or living in Taiwan, as part of a bid to attract skilled workers from abroad. The regulations, which could go into effect in the first quarter of next year, stem from amendments to the Act for the Recruitment and Employment of Foreign Professionals (外國專業人才延攬及僱用法) passed by lawmakers on Aug. 29. Students categorized as “overseas compatriots” would be allowed to stay and work in Taiwan in the two years after their graduation without obtaining additional permits, doing away with the evaluation process that is currently required,
RSS