Euro Rises Against the Dollar

The week on Asian stock exchanges began with a decline in stock prices as there is no progress in budget negotiations in Washington, and the negative sentiment in the market was also contributed by a reduction in growth forecasts for Asian economies.

On the Tokyo Stock Exchange, the Nikkei index was down nearly 1 percent at 7:30 AM, while stock prices in Singapore, South Korea, Australia, and Hong Kong weakened between 0.1 and 0.7 percent.

The MSCI index of Asia-Pacific stocks, excluding Japan, was down 0.5 percent at 7:30 AM.

In Washington, there is still no sign of an agreement on the budget, leading investors to fear that the intransigence of Republicans and Democrats will extend to discussions on the proposal to increase the allowed government borrowing.

John Boehner, the Speaker of the House of Representatives where Republicans hold the majority, stated that he would not support an increase in borrowing without serious discussions, while Democrats warned that it would be irresponsible to put the U.S. in a position where it cannot meet its financial obligations.

If an agreement on increasing the allowed borrowing level is not reached in Congress by October 17, the U.S. government will not be able to meet all its financial obligations, which would severely shake the financial markets.

Although U.S. government services have been non-operational for nearly a week due to the lack of a budget agreement, the pressure to sell stocks has not been overwhelming so far. However, analysts expect an increase in uncertainty as the October 17 deadline approaches.

– As the days go by, U.S. authorities are running out of financial resources, making the situation increasingly dangerous – analysts at ANZ Bank stated in a note to clients.

Investors were further unsettled this morning by the World Bank reducing its growth forecasts for Asian economies. In its latest forecasts for this year, it expects growth in East Asian countries to be 7.1 percent, down from a previous forecast of 7.8 percent made six months ago.

China is expected to record growth of 7.5 percent this year, according to the World Bank’s estimates, while growth of 8.3 percent was anticipated as recently as April.

– The growth of developing East Asian countries is slowing as China’s export-oriented economy gradually shifts towards domestic demand – the World Bank stated.

Due to the uncertain developments in Washington, the dollar is under pressure in the currency markets.

This morning, its exchange rate is around 97.15 yen, down from 97.45 yen on Friday.

The price of the euro against the U.S. dollar has risen from 1.3558 dollars, which it was on Friday, to 1.3570 dollars.

However, the euro has weakened against the Japanese currency, with its exchange rate slipping to 131.80 yen, down from 132.12 yen on Friday.

After rising by about 50 cents on Friday, this morning the futures price of oil on the New York exchange has weakened by the same amount, slipping to 103.35 dollars per barrel.