Reuters: US Dollar Report: FOREX-Euro steady as Dutch sale provides some relief

Reuters: US Dollar Report Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com

FOREX-Euro steady as Dutch sale provides some relief Apr 24th 2012, 10:15 Tue Apr 24, 2012 6:15am EDT * Euro holds in range, outlook clouded by political risks * Dutch auction sees reasonable demand * Two-day FOMC meeting due to start later on Tuesday By Nia Williams LONDON, April 24 (Reuters) - The euro edged higher against the dollar on Tuesday after a solid Dutch debt auction temporarily eased concerns that the collapse of the Netherlands government would spook investors, but the mounting political risks clouded the currency's outlook. The Netherlands sold 1.995 billion euros of two- and 25-year government bonds, roughly in the middle of its target range, a day after Prime Minister Mark Rutte resigned in a crisis over budget cuts. Investors were nervous about signs of political upheaval in one of the euro zone's few remaining AAA-rated economies. The euro had its worst day in a week on Monday, falling half a percent as worries over the outcome of France's presidential election and bearish manufacturing data added to the Dutch concerns. It rose 0.2 percent on Tuesday to $1.3184, paring losses from the previous day when disappointing euro zone PMI data pushed it to a low of $1.3103. The currency, however, remains squarely in a range roughly between $1.30 and $1.33 that it has traded in since early April. Traders cited talk of bids under $1.3110 and lower at $1.3070, and offers from Middle Eastern investors at $1.3180. "There has been more chat about the resilience of the euro that's spooking some people out of playing it lower over the short-term, but there are some very significant risks ahead," said Derek Halpenny, European head of currency research at Bank of Tokyo-Mitsubishi. Ratings agency Moody's said the collapse of the Dutch government after failing to agree on austerity cuts was credit-negative, although it maintained the country's triple-A rating. Fellow agency Fitch warned last week it was on verge of taking negative action on the rating. Many investors were also concerned about events in France where Socialist Francois Hollande - who has promised to renegotiate a European budget pact - won the first round of France's presidential poll on Sunday. The second round of the French presidential election is on May 6, the same day that Greece elects a new government, while Ireland faces a referendum on the European Union fiscal compact later in May. "As we move into May and June we could see further volatility and turmoil which we think will see the euro break below $1.30," Halpenny said. EURO RESILIENCE The U.S. Federal Reserve starts its two-day policy meeting on Tuesday. While the bar has been set high for another round of stimulus, the market will nonetheless be keeping a close eye on policymakers given the still-fragile U.S. economic recovery. Some analysts attributed the euro's recent resilience against the dollar to a fall in Treasury yields on weaker economic data, which has compressed the spread between the 10-year U.S. government bonds and their German equivalent. The apparent inability of the common currency to break either side of the range meant more consolidation was possible, they said, although given the return of tension around debt problems few were optimistic about the euro in the longer term. "We expect euro/dollar to resume a weakening trend in coming weeks, with a break of $1.30 opening up a trading target of $1.25 within a 2-3 month horizon," said Jens Nordvig, global head of FX strategy at Nomura Securities. The Australian dollar hit a two-week low against the U.S. dollar after soft inflation data fuelled expectations of interest rate cuts by the Reserve Bank of Australia. The Aussie was down 0.3 percent at US$1.0286. It earlier fell to a session low of US$1.0247 on data showing Australian consumer prices climbed less than expected last quarter while underlying inflation posted the smallest rise in a decade. The figures paved the way for a rate cut by the RBA next week and suggested further cuts later in the year would be possible. Australia's central bank earlier this month indicated it would consider cutting the 4.25 percent cash rate at its May 1 policy meeting, provided the inflation numbers were tame. The safe haven yen was broadly steady, trading close to flat against the U.S. dollar at 81.14 yen. Link this Share this Digg this Email Reprints

You are receiving this email because you subscribed to this feed at blogtrottr.com. If you no longer wish to receive these emails, you can unsubscribe from this feed, or manage all your subscriptions