TOKYO – The euro weakened against the dollar and yen in Asian trade Wednesday as investors fretted over political uncertainty in Europe and its impact on the common currency.
The euro bought $1.2972 and 103.61 yen in Tokyo morning trade, down from $1.3005 and 103.84 yen in New York late Tuesday.
The dollar was changing hands at 79.88 yen against 79.84 yen in New York.
Political turmoil in Greece and policy differences between French president-elect Francois Hollande and German Chancellor Angela Merkel over how to tackle the eurozone’s debt crisis will continue to weigh on the unit, said Sumino Kamei, senior analyst at the Bank of Tokyo-Mitsubishi UFJ.
The “political situation remains unclear,” Kamei said.
After Greece’s conservative New Democracy party failed to form a government, attention has turned to the radical left-wing party Syriza, which has said it would reject all austerity measures imposed under an EU-IMF loan deal if it comes to power.
But the debt-ridden nation was unlikely to leave the eurozone even if Syriza formed a government, although more fiscally healthy nations could benefit from exiting the 17-nation bloc, Credit Suisse analyst Hiromichi Shirakawa said in a note.
“We should watch (for) the possibility of eurozone exit of four countries – the Netherlands, Finland, Luxembourg and Germany – especially the Netherlands,” he said.
“The euro should plunge if a healthy country leaves. We need to pay constant attention to the risk,” Shirakawa added.
In France, Hollande was elected Sunday on a wave of anti-austerity feeling and pledges to put growth at the heart of European economic policy. Germany, by contrast, has advocated deep public-spending cuts.
Moves to re-balance European economic policy away from austerity alone and kickstart growth gathered pace Tuesday as the European Union called leaders to extraordinary talks this month amid the voter backlash.