TOKYO — The euro rose against the U.S. dollar and the yen in Asian trade Tuesday as expectations of a rate hike by the European Central Bank outweighed any debt fears stoked by Moody’s downgrading of Greece.
The euro firmed to US$1.3982 from US$1.3971. The single European currency rose to 115.00 yen from 114.82 yen. The U.S. dollar moved narrowly against the yen, with trading lackluster amid continued worries over unrest in the Middle East and North Africa, dealers said. The U.S. dollar fetched 82.26 yen in Tokyo afternoon trade, little changed from 82.25 yen in New York late Monday. The U.S. dollar was broadly lower against other Asian currencies. The greenback fell to SG$1.2661 from SG$1.2664 on Monday, to 1,116.65 Korean won from 1,119.60 and to NT$29.34 from 29.40. It also dipped to 30.40 Thai baht from 30.46, to 8,782.50 Indonesian rupiah from 8,787.00 and to 43.33 Philippine pesos from 43.35. The debt woes of the eurozone surfaced again on Monday after Moody’s slashed Greece’s credit rating by three notches from Ba1 to B1 and warned it could be downgraded further given the risks to the country’s stabilization efforts. The euro initially slipped lower on the news but the negative impact on the single European currency proved short-lived, dealers said. The move was particularly embarrassing for Athens, coming days before a crucial eurozone leaders’ summit that will discuss plans for a permanent debt rescue system. Athens blasted Moody’s move as “completely unjustified.” The euro has been underpinned by expectations the ECB will lift rates as early as April, dealers said. “Since this is an interest rate-driven market, a currency of the region or country with an early rate hike expectation tends to be bought,” said Yoshiko Takayasu, manager of FX sales at Royal Bank of Canada in Tokyo. “This euro-buying trend could continue, although Moody’s downgrade of Greek debt reminds us that sovereign debt problems in Southern European countries are smoldering,” Takayasu told Dow Jones Newswires.