Forexpros – The euro was down against the yen Wednesday in mid-session Asian trading on residual fears that downgrades were possible in even the healthiest of European countries.
Furthermore, comments out of Germany that Chancellor Angela Merkel’s government opposes increasing the size of a key bailout fund scheduled to begin operations next year bruised the euro even more.
EUR/JPY hit 101.62, down 0.09% in Asian trading.
The pair was likely to find support at 101.47, Tuesday’s low, and resistance at 103.87, Monday’s high.
In Europe on Friday, almost all members of the 27-member European Union agreed to stricter fiscal coordination and integration.
However, Moody’s Investors Service, a U.S. ratings agency, said the pact wasn’t enough to convince it to reconsider downgrading a slew of sovereign ratings across the continent sometime next year.
Furthermore, reports out of Germany surfaced just prior to Wednesday’s opening that the government opposes increasing the size of the EUR500 billion European Stability Mechanism, which goes into effect in 2012.
Some analysts have said the fund is not large enough to handle all crisis-ridden European countries but only smaller ones.
Meanwhile, the European Central Bank remains on the sidelines refusing to enter the market and buy bonds issued by ailing nations like Greece or Italy, a move supporters say will drive down borrowing costs and alleviate the crisis while critics say threatens to push up inflation rates, goes against the bank’s mandate and gives politicians wiggle room to sidestep painful fiscal reforms the continent needs.
While European monetary policy authorities have expressed willingness to assist struggling financial institutions, they have remained firm that politicians must address their own economic problems.
The euro, meanwhile, was also down against the pound, with EUR/GBP dipping 0.05% and trading at 0.8418, and also down against the Swiss franc, with EUR/CHF sliding 0.10% to 1.2318.
Later Wednesday, the U.K. will release unemployment data while the E.U. will unveil industrial production figures.
Japan will release its Tankan Non-Manufacturing Index as well as its Tankan Large Manufacturers Index.
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