The euro zone debt crisis dominated Asian market activity making investors nervous after the S&P downgrades. Nine of the seventeen euro zone countries had their ratings cut, including France, which was stripped of its AAA rating. The S&P downgrades and the stalled Greek bond swap talks remind investors that the euro area sovereign debt crisis will linger for longer. Also, S&P said it will soon decide on the ratings for Europe’s bailout fund, the EFSF. Ratings cuts for commercial banks are probably imminent too.
The euro fell to its lowest level since 2000 against the yen. EURJPY reached a low of 97.02 compared to 97.56 close on Friday. EURUSD opened in Asia with a gap lower at 1.2633, down from 1.2678 close of New York trading on Friday.
The market focus is on France’s short-term Treasury bill auction later in the day and this week’s resumption of negotiations between Greece and private-sector creditors after they broke down last Friday.
The yen and dollar, as safe haven currencies, strengthened against most major counterparts as the euro zone debt crisis will boost demand for safety. The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at 81.585 from 81.473.
The dollar was up against the Swiss franc to open Asia at 0.9548 francs versus the Friday close of 0.9516. The British pound weakened against the greenback, with GBPUSD falling to 1.5274 in early Asian trading before settling in a range around 1.5286. AUDUSD opened at 1.0306 and dipped to 1.0252.
The Japanese yen was boosted against the dollar after Japanese machinery orders rose 14.8 percent in November, the most in almost four years.USDJPY opened higher at 77.04 but fell after the Japanese data to a session low of 76.78.