February 14 Thursday
The euro fell against the major currencies in Europe following the lower-than-expected 4th quarter GDP data from Germany, France and Italy that showed Europe’s recession deepened more than predicted casting doubts on a recovery in the first quarter of 2013.
The euro weakened further after the comments from the ECB Vice-President Vitor Constancio who said that the ECB is technically ready for “negative” deposit rates if needed. He added, Governments should behave in a way that allows the market to determine foreign exchange rates.
Germany’s Preliminary GDP contracted -0.6 percent in the final quarter of 2012, worse than the median forecast of -0.4 %
France’s Preliminary GDP contracted -0.3 percent in the final quarter of 2012, slightly better than the median forecast of -0.4%
Italy’s GDP fell a sharp -0.9 percent in the fourth quarter of 2012 versus the median forecast of -0.5%. Italy suffered its sixth successive quarterly recession.
The single currency fell sharply by 130 points to 1.3314 from 1.3444 against the dollar in Europe to a three-week low while European stocks fell across-the-board.
The DAX fell 98.28 points to 7,612.13 (-1.27%) and Euro Stocks fell by 30.69 points to 2,626.17 (- 1.15%).
The yen gained as the euro fell and risk-appetite retreated for the peripheral currencies and after Russia’s Finance Minister Anton Siluanov said the country wanted more specific language opposing exchange rate interference in the G-20 talks this week.
Euro-yen fell to 124.00 from 125.95 (-195 pips) while dollar-yen fell to 93.05 from 93.70 (-65 pips) as market participants favored the yen on safe-haven buying and over dollar selling of the yen crosses pushed the yen higher.
Bank of Japan Governor Masaaki Shirakawa said that the central bank’s monetary policy is not directly targeting currency moves. Shirakawa said that the BOJ is conducting monetary policy to achieve stability in Japan’s economy and will continue to do so and he will explain this to the G20 nations.
The BOJ kept its monetary policy unchanged and steady and raised its assessment of the economy on Thursday.