Euro holds ground as rumours flood markets

Tokyo - The euro held its ground in Asian trade on Thursday after plunging to a four-year low on heightened anxiety over eurozone debt, as a flurry of market rumours helped cultivate a mixed trading picture.

Investors took their cue from relatively mild falls on Wall Street, where the Dow pared earlier heavy losses to close down 0.63% after German rules to curb market speculators triggered market turmoil on Wednesday.

The European single currency saw a bounce following rumours of a possible intervention from the Federal Reserve, European Central Bank and Bank of England and talk that Greece may be about to leave the eurozone.

But the currency later lost steam, fetching $1.2334 in Tokyo on Thursday after a volatile 24 hours in which it plumbed a four-year low of $1.2144 before rallying to $1.2408 in New York.

"Once it becomes apparent that the ECB or any other central bank is not about to come to the rescue of the euro the downtrend is likely to resume," said Mitul Kotecha of Credit Agricole CIB.

Eurozone finance chief Jean-Claude Juncker said on Thursday he did not see the need for European policy-makers to act immediately to arrest the euro's recent declines.

"I don't think this is a matter requiring immediate action," he told reporters at the Japanese Ministry of Finance as he responded to a question on whether Europe intends to take steps if the currency's losses accelerate.

Share markets were mixed, with Tokyo off 0.68% as fears for exporters' euro-hit earnings outweighed data showing the economy surged an annualised 4.9% in the first quarter.

Hong Kong was 0.59% higher in early trade, Shanghai rose 0.49% and Singapore added 0.38%, but Sydney fell 0.26% while Seoul gave up 0.26%.

"The key issue we are facing," said David Taylor, market analyst at CMC Markets in Australia, "is a lack of overall confidence."

"It was the key issue following the meltdown of the subprime crisis, so there are no surprises that it would be an issue now," he told Dow Jones Newswires.

Global stockmarkets slumped on Wednesday as a surprise German strike against speculative trading backfired, panicking nervous investors instead of reassuring them the authorities were fully in control.

German Chancellor Angela Merkel called for a radical overhaul of Europe's fiscal rules along German lines, warning of "incalculable consequences" for the European Union if the euro were to fail.

The markets remain concerned despite a near trillion-dollar package to prevent the troubles of debt-ridden Greece spreading to the rest of Europe.

Athens on Wednesday averted a default by tapping into a multi-billion-euro EU loan rescue as unions geared up for a new general strike against harsh austerity measures imposed as a condition of the loan.

A transfusion of €14.5bn a day earlier from its eurozone peers arrived just in time for the country to meet its first debt deadline after an unprecedented bailout deal agreed with the EU and the IMF.

Investors also looked to the United States, where consumer prices fell for the first time in 13 months in April, suggesting there will be no hike soon in interest rates, which are currently at virtually zero percent.

The US Senate on Wednesday voted against ending debate for now on the most sweeping overhaul of financial industry rules since the Great Depression of the 1930s, clouding the measure's future.

  - AFP