Home Tags Posts tagged with "asian trade"

asian trade


Asian markets and the euro have risen after EU officials agreed a bailout deal for Cyprus, easing fears that the country’s banking system problems may spread.

Cyprus will now get a 10-billion euro ($13 billion) cash injection to keep its banking system running and prevent it from crashing out of the eurozone.

Investors had feared that its exit from the bloc may escalate the region’s debt crisis and derail a global recovery.

Shares in Japan, South Korea, Hong Kong and Australia rose on the news.

“The news was what markets were waiting for, some kind of an agreement,” said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo.

Japan’s Nikkei 225 index rose 1.7%, South Korea’s Kospi gained 1.5%, Hong Kong’s Hang Seng added 0.6% and Australia’s ASX200 was up 0.5%.

A failure to reach a deal may have seen the European Central Bank (ECB) cut emergency funding to Cyprus’s two biggest banks, leading to an effective bankruptcy of Cyprus’s government.

The fears were that such a move may prompt the country’s exit from the bloc.

Many analysts had been concerned that Cyprus’s exit may cause a loss of confidence across the eurozone and prompt investors to withdraw from other troubled economies of the bloc, such as Greece.

These concerns had seen investors ditch the euro over the past few days in favor of other assets, such as the Japanese yen and US dollar, seen as comparatively safer.

Asian markets have risen after EU officials agreed a bailout deal for Cyprus

Asian markets have risen after EU officials agreed a bailout deal for Cyprus

However, news of the Cyprus deal boosted the euro.

The single currency gained 0.8% against the US dollar. It was trading at $1.3044 in early Asian trade.

It rose 1.3% against the Japanese yen to trade at 123.81 yen.

“This will likely limit the euro’s downside, with those who shorted the euro covering their positions, and improve general risk sentiment,” said Hiroshi Maeba, head of foreign exchange trading for UBS in Tokyo.

Ben le Brun, an analyst at OptionsXpress in Sydney, added that the deal was likely to have a positive impact on the oil markets as well.

“We should see some positive sentiment reverberate through energy markets overall for at least the next 24 to 48 hours,” he said.

Brent Crude rose 0.3% to $108.34 per barrel in Asian trade, while US Light Crude gained 0.4% to $94.1 per barrel.

Cyprus had agreed a bailout deal with the EU and the IMF last week.

However, the EU and IMF had asked Cyprus to raise 5.8 billion euros in order to secure the funds.

They had proposed that Cyprus impose a one-off levy on bank deposits in order to raise the cash, a move that triggered protests in Cyprus and resulted in savers rushing to ATM machines to withdraw their money – a move that brought fears of a run on the banks.

The Cyprus parliament rejected the proposal last week, delaying an agreement to secure the bailout funds.

According to the latest deal, all deposits under 100,000 euros will be “fully guaranteed”.

However, Laiki (Popular) Bank, the country’s second-biggest, will be wound down and holders of deposits of more than 100,000 euros will face big losses.

The levy on accounts in Laiki Bank could be as high as 40%, correspondents say.

Large deposits in the Bank of Cyprus, the country’s biggest bank, will also face a levy.

Jeroen Dijsselbloem, president of the Eurogroup of eurozone finance ministers, told a press conference in Brussels that the percentage to be levied on large deposits in the Bank of Cyprus will be decided in the coming weeks.

Analysts said that while the draft deal had helped ease market jitters, uncertainties surrounding its implementation were likely to hurt sentiment in the coming days.

The Euro and stock markets have boosted in Asia after a deal to shore up Spain’s troubled banks eased concerns about a European currency break up.

In Asian trade, the euro rose 1% versus the US dollar and Japanese yen. Stock indexes in Japan and Hong Kong rose 2%.

On Saturday, eurozone ministers agreed to lend Spain up to 100 billion Euros ($125 billion) to help its banks.

Analysts said the deal would buy time for policymakers to solve other problems facing the 17-nation eurozone.

The biggest issue now looming on the horizon is the 17 June elections in Greece, and the worry that an anti-eurozone party may end up in a position of power.

“All eyes are still on Greece’s upcoming elections but investors’ worries over the eurozone have eased in the short term,” said Andy Du of Orient Futures Derivatives.

According to Stephen Davies of Javelin Wealth Management, the fact that the Spanish banking bailout was bigger than many people had expected pointed to a continuing “degree of strain within the European banking system”.

The Euro and stock markets have boosted in Asia after a deal to shore up Spain's troubled banks eased concerns about a European currency break up

The Euro and stock markets have boosted in Asia after a deal to shore up Spain's troubled banks eased concerns about a European currency break up

“It reflects the fairly dire straits within which Europe continues to find itself,” he added.

Spain’s weakest banks were left with billions of Euros of bad loans following the collapse of a property boom and the recession that followed.

Currently Spain is in its second recession in three years and the economy is expected to shrink by 1.7% this year.

Its economic problems have become so acute, and its borrowing costs in the international markets so high, that there have been concerns that the government would not be able to service its debts.

At the same time, there were fears that some of its banks would not be able to find enough capital to continue to operate.

The exact amount of emergency funding that Spain will receive will be decided after two audits of its banks are completed within the next few days.

Spain’s loan was welcomed by the International Monetary Fund (IMF) as well as the US and Japan.

Spanish Prime Minister Mariano Rajoy hailed the decision as a victory for the single currency.

European Union economic affairs commissioner Olli Rehn said the deal was a clear signal to the markets that the euro area was ready to take decisive action to calm markets and contain contagion.

Spain is the eurozone’s fourth-biggest economy – twice the size combined of those of Greece, Ireland and Portugal, the countries bailed out so far.

However, tensions over the euro remain high with another election to be held in Greece next weekend.

If voters elect a government that refuses to abide by the terms of the country’s bailout deal, Athens faces a possible exit from the bloc.

Analysts said that in the days leading up to the election it was likely that a low-risk appetite from investors would return.

There are fears that a Greek exit could trigger a run on the banks, not only there but in other eurozone countries.

Greece has been in recession for five years, crippled by huge debts, high unemployment and labor unrest.