Monday, July 18, 2011

Debate on Lifting the U.S. Debt Ceiling Continues

Previous session overview

The Swiss franc hit record highs against the euro and the dollar Monday in Asia and the yen gained as investors remained cautious about the euro zone's festering debt crisis in a session thinned by a Tokyo holiday. 

Attention was already turning to a Thursday meeting of European leaders aimed at stemming Greece's woes. This sapped any strength the euro picked up Friday, when far more European banks than expected passed "stress tests" of their financial strength. 

Asian currencies were generally weaker against the dollar on risk aversion, with most regional stock markets lower. Currency investors had no directional cue from Japan, where markets were closed for Marine Day. 

The safe-haven Swissie has benefited from the market angst. The euro fell to a record low CHF1.1365, in early Asia trade Monday. At 0628 GMT it had recovered to CHF1.1428. The dollar hit an all-time low CHF0.8034 before rebounding to CHF0.8129.

The dollar was at JPy79.02, down a bit from JPY79.13 late Friday in New York, while the euro was at JPY111.13, down from JPY111.94.

At 0625 GMT, the euro traded at USD1.4066, from USD1.4150 late Friday in New York.

The Australian dollar was lower late Monday struck by renewed global jitters linked to the impasse over U.S. debt ceiling talks and uncertainty surrounding moves to bolster Greece's flagging finances. At 0600 GMT, the Australian dollar was at USD1.0604, down from USD1.0662 late Friday. Against the Japanese yen, the Australian dollar was at JPY83.77, down from JPY84.455.

Market expectation

Market participants remain wary of the common currency as they await details of the still-elusive second bailout of debt-laden Greece. That's the topic of this week's euro-zone summit. 

But the dollar is far from a favored alternative for investors, as the contentious debate on lifting the U.S. debt ceiling continues. Concerns about the dollar and euro have left investors with little conviction to place bets on either currency, analysts said. 

In Australia investors will await the release Tuesday of the Reserve Bank of Australia's July 5 policy meeting minutes. Most expect the central bank to continue signaling caution, highlighting a slower-than-expected recovery in the economy from the disasters at the start of the year.

European stocks are seen opening slightly lower Monday with the European Banking Authority's stress tests on the region's lenders unlikely to generate confidence ahead of the latest proposed EU summit, on Thursday.