Euro exchange rate today: Now China gives the single currency a kicking while Norway shies away from Eurozone govt debt

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Published on Friday, 10 August 2012 09:31

Written by Will Peters

International Money Transfers at our sister site

"This complicates the prospects for an imminent recovery. With the export sector losing speed faster than expected, the government's current investment stimulus plan looks woefully inadequate"- Alistair Thornton at IHS Global Insight.

The euro (Currency:EUR) is finding the going rather tough this morning:

The euro dollar exchange rate is 0.27 pct in the red at 1.2272.

The euro pound exchange rate is 0.05 pct lower at 0.7866.

Markets have kicked-off today's session in the red suggesting a cautious approach by investors which inevitably translates into a euro sell-off.


China is behind today's sell-off. The Asian giant reported exports in July rose 1 pct compared with the same month last year.

Consensus forecasts were for a rise of 5 pct so that’s quite the shortfall. Import growth was 4.7 pct - also missing forecasts - down from 6.3% in June.

The trade surplus with the European Union - China’s biggest trading partner - also reflected sluggish demand as it narrowed by 40 pct to $10.8bn (£6.9bn). New loans are also at a ten-month low.

XiaoBo, economist at Huarong Securities in Beijing, said the required reserve ratio - minimum cash piles for banks - might have to be cut to help stimulate economic growth.

"We think the central bank should move as quickly as possible to stabilise the economy. I expect there will be at least one more RRR cut and interest rate cut this quarter."

Alistair Thornton at IHS Global Insight in Beijing, added:

"This complicates the prospects for an imminent recovery. With the export sector losing speed faster than expected, the government's current investment stimulus plan looks woefully inadequate."

Meanwhile, Norway's $600bn (£384.6bn) sovereign wealth fund is shying away from eurozone government debt and increasing its exposure to emerging markets and the US, it has announced this morning. The fund is a product of Norway's oil boom and has already sold all of its holdings of Irish and Portuguese state bonds.

In its latest quarterly report, the fund said it had bought more Japanese, US and emerging market bonds, while selling down French, British and Spanish government debt.

Elsewhere, ECB's Noyer comments that the markets should not doubt the ECB's determination and capacity to act within the terms of its mandate.

He said the ECB must be ready to act quickly and should prioritise the short-term bond market.

Further, he said intervention must be of sufficient size to have a strong impact on the market.

Greece’s Deputy Finance Minister Staikouras commented that the government would present its budget plan - to reduce deficits by EUR11.5 bn - to the EU by September 14 and hoped that the next tranche of bailout funds would come “right after” a positive review by the Troika. Reuters reported that a bulk of the savings will come from salary, benefits and pension cuts and by reviving the ‘labour reserve plan’ that includes laying off 40K public servants.

In its August monthly report, the ECB expected inflation to further decline in 2012 and remain below 2.0% in 2013.