A Possible Japanese Intervention?
With intervention looming on the horizon, the yen has started to fall against the dollar in recent training. The Japanese government wants a weaker yen in order to improve Japan’s export market. With investors propping up the yen in search of a safe haven, the currency has appreciated in recent weeks. After so much speculation in the Forex market, the Japanese government is rumored to be on the verge of a market intervention.
The rumored intervention caused the yen to fall to a low of 78.80 during today’s session. If the intervention does not occur, market analysts believe that the value of the yen could rise again. Short-term risk in the Eurozone area has fueled panic the euro could bottom out in future months. By the middle of the day, the yen was close to the eight month high it had hit last week.
Over in Australia, the Australian dollar has received a bit of attention. The Reserve Bank of Australia announced their plan to cut the interest rate to 3.5 percent. In response, the Australian dollar was up 0.1 percent against the United States dollar to finish at $0.9735.
Investors are waiting until Wednesday to reverse any positions on the euro. On Wednesday, the European Central Bank is holding a meeting to look at refinancing in the Eurozone and measures that can prop up the euro. After debt problems in Greek and Spain, positive solutions made by the ECB will come as a relief to investors around the world. Some analysts believe that little progress will be made at the meeting. The major work in fixing the euro’s issues is expected to occur after the elections in Greece are held on June 17. After this date, the ECB may choose to cut interest rates or inject funds into troubled markets in the Eurozone.
Less Money for Bankia
After news came out about potential bailouts of Bankia, investors scrambled to leverage risks within the Eurozone. As the fourth largest bank within Spain the performance of Bankia is a microcosm of all financial matters in the country. Within the last month, the troubled bank asked the government for 19 billion euros in aid. It seems like this request will not be answered by Spain.
Spain has already injected 3.5 billion euros into the support of Bankia. After more struggles in the real estate market, Bankia has requested additional funding. Sources in Spain believe that this funding may not be for the total of 19 billion euros. The Spanish government believes that the euros needed to rescue the bank have been overestimated. Money can only be granted to the company after Bankia’s finances are carefully reviewed and audited.
In the next two months, a stress test will be conducted on Spanish banks. Done over the course of two tests, reports on the testing will be issued at the end of June and August. All stress tests and audits will be conducted by the International Monetary Fund. Prior to this release, Bankia plans on presenting a proposal to the Spanish government on the 11th of June.
Part of the issue with supporting Bankia is obvious: it costs money. Spain has seen its borrowing cost rise in recent months. Getting the money to bailout Bankia would be difficult and expensive. If Spain borrows too much money, it could cause the bond market to rise to an unsustainable level.
Is the Euro Dead?
Amid continued speculation by investors, it seems like the euro will barely make it out of the financial turmoil that has rocked Europe this year. The euro has managed to hit a two year low against the dollar on Friday. Possible bailouts in Spain and Italy have served to fuel this speculation. Currently, most analysts believe that the euro has been oversold. Provided no unexpected events take place, the euro should bounce back slightly.
Matters will either improve or worsen significantly in just a matter of weeks. On June 17, Greece is headed for a second vote. If the New Democracy party wins, Greece will most likely stay in the Eurozone and work on a bailout package. Other parties in Greece have been hesitant about committing to any bailout plan. Current polls still show that the New Democracy is slightly ahead among voters. If the win the election, voters around the world can relax as the Eurozone’s debt problems sort out on their own.