The Euro has lost significant strength during Asian trade due in part to a report in the Wall Street Journal which revealed that Europe’s recent stress tests of major banks understated some lenders’ holdings of potentially risky government debt.
The analysis found that an examination of the banks’ disclosures indicated that some banks didn’t provide as full unbiased picture of their government-debt holdings as regulators claimed. It also stated that some banks excluded certain bonds which could potentially turn out to be toxic. It said that neither regulators nor most banks disclosed these facts when the test results were published in late July. This is tantamount to a cooking of the European banks books and in a world where transparency rules supreme this type of cooking can only be perceived as a ploy by the European banks to hide some large structural flaws.
This weakness has allowed the pound to regain the 1.2 GBP/EUR level of support it lost yesterday, the EUR/USD rate has meanwhile broken support and the Euro is dangerously near a 15 year low against the Yen again.
The Australian dollar has weakened slightly after an unexpectedly dovish statement from the Reserve Bank of Australia coupled with the confirmation that Julia Gillard’s Labor government will remain in power.
The country’s central bank left interest rates unchanged at 4.50% for a fourth month in a row, and noted caution about the global economic outlook. Meanwhile, given Ms. Gillard’s support for a resources rent tax on the mining sector, currency traders had viewed support of her government as a negative for the local currency.
Taiwan’s exports have slowed down considerably as figures show a 26.6% growth, the slowest since last November,” “You can see the global cooling phenomenon, but for emerging markets, because costs are lower, orders are coming around. The appreciation of the Japanese yen is also a boon for Taiwan’s manufacturers,” said Wai Ho Leong from Barclays capital research.
UK treasury official said on today that at least 10 Indian banks have shown interest in opening offices in the UK. Talks have been ongoing for a while now but notoriously insular Indian banking system has so far refused to allow full penetration by the international banking system due to fears that they would lose some of their sovereign control. Lord Sassoon, commercial secretary to the UK Treasury stated he would like to see full reciprocity from India on banking license.
This could allow UK banks to break into an outdated and archaic Indian banking system for the first time since partition. The Indian Rupee has strengthened slightly on the news.
The Swiss franc showed mixed trading against the majors during early European trading today. The franc edged lower against the yen which is attributed more to the overall strength of the Yen, it held steady versus the rest of majors.
Switzerland’s unemployment rate was unchanged at 3.6% in August as expected, while the number of unemployed persons increased modestly, official figures showed today.