Outlook for euro grim as debt problems lash major economies

Dubai: The Greek debt is still containing the current market sentiment by the European Union (EU) Summit. The forex market is moving by the news about this development and whether there will be a joint help to rescue the economy by the EU members and what the cost will be. If there is no bailout plan, the outlook for the single currency looks grim, as the debt problems have also impacted other EU members such as Spain and Portugal.

Euro

The European Central Bank and the European Commission will join forces to monitor Greece and to draw up "necessary additional measures" to maintain stability in the euro zone, the ECB said on Friday.

Greece has been pounded by markets after revealing its 2009 budget deficit was 12.7 per cent of the gross domestic product, more than four times the EU ceiling of 3 per cent and three times initial estimates.

Economists said the ECB was likely trying to ensure Greek plans would be implemented strictly, even if this meant a small move away from European Union treaty rules.

Range for previous week: $1.3525-$1.3839 (Dh4.9677- Dh5.0831)

Range for this week: $1.3450-$1.3790 (Dh4.9402- Dh5.0651)

Sterling

Britain and the United States are more convinced of the need to force banks to hold more capital than some big European nations, Bank of England (BoE) Governor Mervyn King told the Council for Financial Stability last month.

The minutes of the first formal quarterly meeting of the new body — made up of the BoE, the Treasury and the Financial Services Authority — on January 14, published on Friday, showed King felt the task of getting nations to agree to stricter rules for banks "should not be underestimated".

The G20 group of developed and emerging nations have been looking at ways to strengthen regulation after the crisis but there have been concerns that a show of unity at the height of the crisis may fall apart as the global economy recovers.

Range for previous week: $1.5533-$1.5660 (Dh5.7052-Dh5.7521)

Range for this week: $1.5510-$1.5722 (Dh5.6968-Dh5.7747)

Yen

Just over a third of Japan-ese voters support Prime Minister Yukio Hatoyama's government, a poll showed on Friday, after his decision to retain a ruling party kingpin despite a funding scandal. The Jiji agency poll also showed support for Hatoyama's Democratic Party down ahead of a mid-year election for parliament's upper house, in which the party needs to win a majority to push through policies. Weak support before the election could tempt policy makers to spend more for the economic recovery, possibly stoking concern in the bond market over an increase in Japan's already huge public debt.

Range for previous week: 88.54 yen-91.07 yen (Dh0.04033-Dk0.04148)

Range for this week: 88.30 yen-91.69 yen (Dh0.04006-Dh0.04160)

— HSBC Global Markets Middle East