Low investor confidence takes euro lower

Story link: Low investor confidence takes euro lower

The euro weakened on Tuesday after a new round of figures from the ZEW institute in Germany showed that German investor confidence plummeted in August. Reasons for the decline, which fell from 15.1 in July to -5.6 in August, included the concern that growth could stagnate due to higher oil prices and interest rates as well as a scheduled rise of the VAT in Germany next year. It was the seventh decline in investor sentiment in a row. Still, some analysts believe that the new data will not stop the European Central Bank from raising interest rates again in September.

By the middle of the afternoon in New York, the euro had dropped 0.1 percent to ¥149.20 against the Japanese yen. It was 0.6 percent lower to $1.2810 in relation to the US dollar.

The dollar was higher versus the yen as well, adding 0.5 percent to ¥116.50. The Japanese currency was negatively affected by slumping sales in department stores and supermarkets there. Because these sales contribute a significant portion to the Japanese GDP, declines in sales are likely to cause the Bank of Japan to hold off longer before raising interest rates again.

Sterling, meanwhile, added 0.4 percent to £0.6780 versus the euro after the Bundesbank head, and ECB council member, made comments implying that some of German’s reserves might be transferred from gold into foreign currencies.