Asia markets

While Japanese and South Korean exporters are worried about what the soaring price of the yen would bring, investors are choosing to secure their assets by moving back to gold and the Swiss Franc. The price of gold has now reached a record of $ 1,672 per ounce (28.34 g).

The Swiss franc touched an all-time high against the Euro on Wednesday which prompted the Swiss National Bank to cut its interest rate in an attempt to stop the national currency from appreciating further.

Should the central bank step in?

Meanwhile, there is also a chance that the Bank of Japan may step in to ease the upward trend of the yen. Tomohiro Ishikawa, dealer at the Choi Mitsui Trust and Banking in Tokyo says," US data released overnight continued to show the weak state of the nation's economy, but it is difficult to sell off the dollar against the yen amid caution over Japanese authorities' possible intervention."

The dollar has finally steadied against the yen after it dropped to its post-war level of 76.25 yen this year in March. Earlier this week, the dollar was at 76.29 yen and finally settled at around 77.25 yen. However, analysts believe that any intervention from Japanese authorities to bring the yen down may not have any impact as the yen's appreciation is primarily due to the weakening of other currencies.

Doubts over US debt deal

This latest spate of uncertainty in the market comes amid worries that the new debt deal in the US may not prove to be very effective for the country's economic growth. Germany’s Commerzbank was very vocal while cautioning its clients, saying, "The US debt crisis is tamed, the economic crisis back" in what was an obvious reference to the new debt ceiling deal signed by US President Barack Obama. Under the agreement reached by Obama and top lawmakers, the US government's debt limit is to be increased by about $ 2.4 trillion in two steps, while the government takes steps to cut spending.

Investors are also nervous about the debt crisis gripping the 17-member eurozone spreading to other members of the euro. This prompted a rise this week in borrowing costs for Italian and Spanish government debts. Investors sold Spanish and Italian bonds at cheaper rates based on concerns that their debt problems would only get worse as economic growth slows down.

Crisis management in Europe

Meanwhile, European officials have already began mounting an operation to allay market fears that further eurozone states may fall victim to the debt crisis, which first emerged at the beginning of last year. The chairman of the Eurogroup, Jean-Claude Juncker, is meeting with Italian Finance Minister Giulio Tremonti in Luxembourg on Wednesday amid the ongoing pressures on Italian government debt market.

Italian Prime Minister Silvio Berlusconi is also expected to try to ease market tensions when he addresses the nation's parliament on Wednesday on the state of the country's public finances.

Author: Manasi Gopalakrishnan (Reuters, AFP, DPA)
Editor: Sanjiv Burman