By: Barbara Zigah
In Asian trading today, the common currency held close to the 4-month low struck yesterday, even after the Japanese government reported that it would buy approximately 20% of the European rescue fund bonds that will be sold later in the month which are intended to help Ireland out of its financial predicament.
Investor enthusiasm was dampened, however, when it was learned that Japan’s current holdings in the common currency Euro would be used to purchase the bonds. Most investors believe that the Euro will be very vulnerable this week, given the upcoming European debt auctions. As reported at 2:23 p.m. (JST) in Tokyo, the Euro traded lower against the U.S. Dollar at $1.2940, down .1% from New York late trading; immediately following the government of Japan’s announcement, the trade price had risen to $1.2992.
This week, the Portuguese debt auction will be the market’s primary focus, and likely the deciding factor as to whether or not the Portuguese government will be compelled to rely on a bailout from the E.U./IMF special purpose mission.
The yields for 10-year Portuguese debt rose to 7.1%, and many analysts expect that if it rises any higher the Portuguese government will have little choice but to seek a bailout. Italian and Spanish debt are also set to be put on the auction block on Thursday, and investors are anxious to see the premium the markets will likely demand.