Euro keeps Wall St gains, analysts warn on Russia
TOKYO, Japan – The euro was flat in Asian trade Tuesday, March 25, after enjoying a rally in New York but analysts warned of downside risks if Western leaders tighten economic sanctions on Russia over the Crimea crisis.
The eurozone has strong business links with Moscow and any disruption of crucial oil supplies from Russia could weigh on the single currency, analysts said.
In Tokyo afternoon trade, the euro bought $1.3834 and 141.47, from $1.3835 and 141.48 yen on Monday in New York, where it rose on an improvement in eurozone business activity this month.
The dollar edged down to 102.24 yen against 102.26 yen.
The Indian rupee hit a 7-month high of 60.50 to the dollar, as it slowly recovers from a sell-off that had been fueled by the US Federal Reserve's decision to start winding down its stimulus program.
On Monday, March 24, US President Barack Obama and other members of the Group of Seven economic powers cancelled an upcoming summit in Russia, seeking to deepen Moscow's isolation after it absorbed Crimea from Ukraine this month.
After emergency talks called by Obama, it was announced that the June gathering in Sochi would be replaced by a G7 meeting in Brussels, without Russian involvement.
While the euro held on to its Monday gains, investors were gauging the possible wider impact that any fresh sanctions on Moscow.
"Anything along those lines may see the euro dip down, mainly because central Europe receives the majority of its oil supplies from Russia and the eurozone has very strong economic links with Russia," Stuart Ive, senior client advisor at OM Financial in Wellington, told Dow Jones Newswires.
"Any sanctions will weigh on the euro."
Investors will be closely watching a Paris lecture by European Central Bank chief Mario Draghi on Wednesday to see if he gives any fresh policy hints.
Credit Agricole said: "Although risk aversion has declined from recently elevated levels there is still a high degree of caution from investors who are unwilling to take long term bets.
"The causes of market angst have remained unchanged over recent weeks namely Ukraine tensions, weaker growth in China and US data that has performed below expectations."
India's rupee continued to enjoy support as fears over the end to the Fed's stimulus dissipate, while traders are hopeful of a victory for the pro-business BJP opposition in upcoming general elections.
The unit was one of the worst hit among emerging market currencies last year by the Fed's tapering move as foreigners withdrew their investments on the expectation that interest rates at home will rise. – Rappler.com