| GEO Business | | Euro gives ground and Asian stocks weak | Updated at: 1035 PST, Monday, May 24, 2010
 TOKYO: The euro struggled to hold on to gains on Monday as investors sold into its latest bounce, while Asian stocks recouped ground from last week's eight-month lows on fears the euro zone debt crisis will hit world economic growth.
Market volatility remained high following the euro's decline to a four-year low last week, however, and investors further cut risk in their books to wait for things to calm down, traders said.
Losses in the Australian dollar deepened after miner Rio Tinto said a mining tax had damaged Australia's investment reputation. The currency bounced back from its lows as stocks in China, with which Australia has close trade ties, rose 3 percent.
The MSCI index of Asia-Pacific shares outside of Japan rose 1.2 percent after a weaker start, moving up from the lowest level since September 2009.
"Today's gains were merely a technical rebound as the slides last week were too much, too fast," said Eddy Chen, a manager at the fund business at Taiwan's First Financial.
The Shanghai Composite Index gained 3.1 percent, buoyed by a surge in property shares after a media report quoted a government official as saying a new property tax recently under discussion would not come within the next three years.
Investors sold Japanese exporters' shares to pull the benchmark Nikkei average down to its lowest level in more than five months, taking the view that a strong yen undermines future profits. The Nikkei fell 6.5 percent last week, its worst weekly drop in more than a year.
The euro fell to around $1.2500 in Asian trade from around $1.2570 in late New York dealings on Friday. The currency had posted its first weekly gain against the dollar in six weeks last week as investors bought it after a long slide.
Dealers said the health of the Europe's banks weighed on the euro. At the weekend, the Bank of Spain said it was taking over the running of savings bank CajaSur after its planned merger with another small Spanish lender failed.
"The currency market focus is still the euro zone's fiscal trouble, but weariness about its impact on the global economy seems to be spreading, making investors increasingly risk averse," said Jun Kato, senior manager for investment at Shinkin Asset Management.
The Australian dollar fell as investors, fearful of slower world economic growth, unwound carry trades funded in the euro.
The euro rebounded sharply against the high-yielding Aussie last week, hitting three-month highs of A$1.5456, on the back of a huge sell-off by hedge funds.
On Monday, the pair was trading at A$1.5108, just above late levels in New York on Friday. The Australian dollar fell 0.5 percent against the yen to 74.61 yen.
The Aussie dollar extended its broad slide after Rio Tinto said it is reviewing all capital spending plans in light of the government's proposed resource super profits tax.
Australian stocks rose, buoyed by bargain hunters picking up banks and miners, following a slight recovery on Wall Street. The benchmark S&P/ASX 200 index gained 1.4 percent to 4,364.2, moving away from 10-month lows on Friday.
Oil prices snapped three straight sessions of decline and rose slightly to hover above $70 a barrel, though analysts said sentiment remain fragile and prices could be again be hit by macroeconomic pessimism.
An oil price of $65 per barrel is still reasonable for all producers, but a price below that will be a "disadvantage," the chief executive of Saudi Basic Industries Corporation (SABIC) said on Sunday. |  |
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