Euro remains under pressure after S&P action


TOKYO–The euro remained under pressure in Asia Monday after slumping at the end of last week following Standard & Poor’s (S&P) downgrade of France’s credit rating and those of eight other European nations, dealers said. The euro recovered slightly in Tokyo afternoon trade, trading at US$1.2646 compared with US$1.2624 in New York late Friday. It also rose off its intra-day low against the Japanese unit to trade at 97.12 yen, but remained below the 97.20 yen in New York. The euro’s value against the dollar and the yen continues to face downward pressure following the swathe of eurozone downgrades on Friday, said Yuji Saito of Credit Agricole in Tokyo. “There is speculation that the rating of the EFSF may also be downgraded, and so investors are waiting for comments by Germany,” hoping for clues as to whether it will do more to shore up the European Union’s bailout fund, he said. German Chancellor Angela Merkel said Saturday that she did not believe the ratings downgrade would impact on Germany’s contribution to the European Financial Stability Facility (EFSF). “I do not believe that the downgrade in any way has an influence on Germany having to do more compared to others,” Merkel said.

The temporary EFSF uses guarantees issued by eurozone governments to raise financing on money markets, which are then lent to debt-wracked eurozone countries, and was set up with a capacity of 440 billion euros (US$556 billion). Its successor, the European Stability Mechanism, is due to take effect in July 2012 with funding of 500 billion euros. Germany, Europe’s top economy, was spared by S&P, which maintained its top AAA rating. But prospects of the eurozone crisis worsening were heightened as France and Austria were reduced from AAA to AA+ and talks to agree a Greek debt write-down stalled.