Currency traders spent Tuesday looking for a reason to pick a side, and mostly did not find one. The dollar euro yen exchange rates barely moved in early Asian trade, even as a modest recovery in confidence helped higher-yielding currencies. The US dollar was flat at 158.56 yen, and the euro held near $1.12.
Europe’s political jitters
Europe is the main worry. French authorities imposed curfews in several cities after anti-government protests, and Italy said it would send 500 troops after two days of unrest. The gap between French and German 10-year bond yields widened to about 147 basis points. Even so, one Pepperstone analyst noted the euro’s resilience suggests traders are not yet treating French risk as a systemic European problem.
The yen finds a lifeline
The yen slipped early, but later gained after a Japanese long-dated bond auction drew record demand. It strengthened about 0.2% to 158.15 per dollar. The US dollar index, which tracks the greenback against six currencies, hovered near 101.8, at the lower end of its monthly range. Other moves were small: the Australian dollar was at $0.6986 and the dollar was flat at 6.6811 yuan after China kept rates unchanged.
Why the US dollar matters across Africa
These foreign exchange trends are not just a Wall Street story. Many African governments and companies borrow in dollars, so a stronger greenback raises repayment costs for countries from Ghana to Kenya. It also makes imported fuel, wheat and machinery more expensive. Meanwhile, the euro matters for remittances and trade with Europe, Africa’s largest partner.
For a traveller, an importer or a family waiting on money from abroad, a quiet day in currency markets is welcome news. With the US 10-year Treasury yield above 5.1%, though, investors have plenty to think about, and calm may not last.
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