The dollar has continued to rebound against its major European competition on Monday, but has weakened versus the Japanese Yen. The dollar appears to be benefitting from its safe haven status, as global growth concerns have had an impact on equity markets. Reports of differences of opinion between Germany and France over plans to monitor European banks and continued weakness in German Ifo business sentiment are just some of the factors that have investors concerned today.
Growth worries from China also garnered investor attention after Song Guoqing, an academic adviser to the People's Bank of China, said he saw no signs of a rebound in the third quarter and domestic investment is unlikely to expand dramatically in the short term.
Eurozone countries are planning to increase the size of the region's permanent bailout fund dramatically, Germany's Der Spiegel reported Sunday.
The governments are preparing to quadruple the capacity of the European Stability Mechanism (ESM) to EUR 2 trillion from the current EUR 500 billion, the magazine reported citing a Finance Ministry spokesperson.
Backing calls for more lenient bailout terms for Greece, French Prime Minister Jean-Marc Ayrault said in an interview to a French news website over the weekend that the embattled euro member should be allotted more time to cut its budget deficit and implement the planned reforms.
Talking to the news website Mediapart, Ayrault said he favored giving Greece more time to pull through the crisis on condition that it remains sincere in its commitment to reform, particularly the fiscal ones.
Policy makers at the European Central Bank (ECB) are unlikely to cut interest rates further, given the high inflation rate and improvement in euro-area's economic outlook, European Central Bank Executive Board member Benoit Coeure said Sunday.
Speaking to reporters after attending a conference on the Palestinian economy, Coeure said "It is not absolutely obvious that another rate cut would be necessary in the light of recent economic indicators and in light of inflation developments."
The German economy will continue its upward trend amid high uncertainty, the Bundesbank said in its monthly report for September. The economy made a good start to the summer quarter, it said. Household consumption and construction activity remain robust.
The central bank, however, warned that future development is subject to great uncertainty. The labor market is showing signs of a weaker economy, the bank added.
The dollar gained ground against the Euro in late trading Friday and has risen further on Monday, reaching over a one-week high of $1.2890.
German business sentiment declined for the fifth consecutive month in September suggesting that even the bond purchase programme announced by the European Central Bank failed to shore up confidence.
The business climate index fell to 101.4, which was the lowest since March 2010, from 102.3 in August, the survey based on 7,000 executives by the Ifo Institute showed Monday. The index was forecast to remain unchanged at 102.3.
The Bank of England's Financial Policy Committee maintained its policy recommendations on September 14.
"The committee judged that the risks to financial stability hadn't altered sufficiently since its previous meeting to warrant a change to its current set of policy recommendations," the BoE said in a statement on Monday.
The greenback has also extended Friday's late gains against the pound sterling Monday, reaching a high of $1.6181.
UK's household finances continued to deteriorate in September as the overall sentiment turned more downbeat mainly due to a sharp increase in inflation perceptions, data from a survey by Markit Economics showed Monday.
The headline household finance index, which measures respondents' views of their present financial situation, declined to 38.4 in September from the 20-month high of 38.9 in August.
Although the domestic demand as a whole is set to maintain its firmness, it might be difficult to expect it to offset the weakness in external demand and further elevate Japan's economic activity, Bank of Japan Deputy Governor Hirohide Yamaguchi said Monday.
Japan's economy registered relatively high growth in the first half of 2012, supported by the firmness in domestic demand, Yamaguchi said in a speech at the Asian Affairs Research Council.
But the pick-up in economic activity has come to a pause, reflecting the developments in overseas economies. Today, Standard & Poor's cut Japan's growth outlook to 2 percent for this year.
The buck has extended Friday's weakness against the Japanese Yen at the start of the new trading week, falling to over a one-week low of Y77.800.
by RTT Staff Writer
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