Asian shares edge up, euro under pressure as European Central Bank looms
ECB officials told Reuters they are considering options such as whether to stagger charges on banks hoarding cash or to buy more debt, ahead of next week’s policy review.
The two-year yield (US2YT=RR) was unchanged at 0.9343 percent, which was within striking distance of the 5-1/2-year peak seen on November 6.
TOKYO/SINGAPORE – Asian shares advanced on Thursday, while the euro remained under pressure on the growing expectation that the European Central Bank (ECB) will roll out more stimulus soon even as the US Federal Reserve looks set to raise interest rates.
The ECB’s Governing Council will meet in Frankfurt on December 3 for its next monetary-policy meeting.
“The question now is how far can we go, and as the Fed tightens, euro/dollar parity is looking likely by the second quarter of next year”.
The euro dropped 0.1 percent to $1.0610 as of 9:22 a.m. London time after sliding to $1.0566 on Wednesday, the lowest since April 14.
Traders expect a more subdued session on Thursday with US markets shut for the Thanksgiving Day holiday.
Europe’s central banks are struggling with divergent quandaries over how to revive inflation and sustain economic growth as the US FederalReserve prepares to start raising interest rates for the first time since the collapse of Lehman Brothers.
“The way the market is reading it (the Reuters story) is that if the ECB manages to set up some sort of tiering arrangement, it would make it easier to cut rates, because it could set that up as being less penal on the banks”, said RBC currency strategist Adam Cole, in London.
Speaking at the same event, the Bundesbank’s president Jens Weidmann, one of the most prominent critics of the ECB’s ultra-easy policy, struck a more upbeat tone on the economy and made the case for waiting before taking new policy steps.
The dollar index, which tracks the greenback against a basket of six other major currencies, scaled an eight-and-a-half-month high of 100.170 overnight. It last stood at 99.863.
The incident briefly sparked oil supply fears and sent crude prices surging overnight to 2-week highs. The Aussie was steady at $0.7258 after hitting a 1-month high of $0.7276.
USA crude CLc1 and Brent crude LCOc1 futures fell around 2 percent to $42.09 and $45.16 a barrel, respectively.
The U.S. dollar was lower, hurt in part as the latest flare up in geopolitical tensions generated demand for safe haven Treasuries and drove their yields lower.
“We are keeping an eye on the dollar as a possible catalyst (for gold)”, ScotiaMocatta analysts said in a note.