--Risk appetite wanes as focus returns to European debt
--China yuan trading bank widening a surprise, but few shock
waves
--Moody's report on European Bank darkens mood
SYDNEY -- The euro and Asian emerging currencies were lower
against the dollar in early trade Monday on fears about Spanish
debt, and the Chinese yuan fell against the dollar after China's
central bank shifted to a more flexible exchange rate over the
weekend.
The Singapore dollar fell, with the U.S. dollar at S$1.2516 at
0210 GMT versus S$1.2482 late Friday in New York.
News that China had widened the yuan trading band was greeted
with some surprise, but most traders said it was a positive sign
that Chinese authorities are less worried about a hard landing for
the economy. The move bolsters expectations that the yuan has
entered a period of greater volatility and increased two-way trade,
and will see less appreciation in the medium term.
The yuan fell sharply against the U.S. dollar in the wake of
Beijing's move. The dollar traded at CNY6.3196 at 0158 GMT, versus
CNY6.3030 late Friday. That was after the People's Bank of China
fixed its dollar-yuan parity rate higher at 6.2960, versus its
Friday fixing of 6.2879.
The PBOC said Saturday it would widen the yuan's trading band
against the U.S. dollar to 1.0% above and below the parity rate
from Monday. The trading range was 0.5% previously.
"The move should appease those calling for more yuan
appreciation, and moderate concerns regarding global imbalances,"
said Emma Lawson, senior currency strategist at National Australia
Bank.
"Some comfort may be taken by the view that this liberalization
may signal China's level of comfort with the economy, as any
currency strengthening represents a policy tightening, at the
margin," she added.
But the major focus of trading is on Europe, with attention
locked on funding for Spain and Italy's banks.
"So far, there hasn't been much impact from the yuan band
widening. Spain is having a bigger impact on Asian trading," said
Frances Cheung, senior strategist Asia ex-Japan at Credit
Agricole.
Over the weekend, top European Central Bank official Joerg
Asmussen said Europe has "done its part" to protect the global
economy against financial turbulence, and called on the rest of the
world to pledge more money to the International Monetary Fund's
anti-crisis war chest.
The comments came after data Friday showed Spanish bank
borrowing from the European Central Bank surged to new highs in
March, sending shudders through European markets and helping push
U.S. stocks to their worst week this year.
"The euro is on its knees thanks to renewed funding pressures
for Spain and Italy. Until that gets resolved the euro will remain
under the pump," said David Scutt, senior trader at Arab Bank.
Tim Waterer, strategist at CMC Markets said a report suggesting
ratings agency Moody's Investors Service was looking at a possible
downgrade of European institutions also weighed on sentiment
Early Monday, the euro was at $1.3023 from $1.3077 late Friday.
The common currency was at Y105.3605 from Y105.77. The dollar was
unchanged at Y80.915 and at CHF0.99233 from CHF0.9197. The
Australian dollar was down versus the greenback, at $1.0327 from
$1.0372. The U.K. pound was at $1.5833 from $1.5843.
-By James Glynn, Dow Jones Newswires; 61-2-8272-4685;
james.glynn@dowjones.com