Reuters: US Dollar Report: FOREX-Euro inches down towards 2-yr low vs dlr after rebound

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FOREX-Euro inches down towards 2-yr low vs dlr after rebound Jun 4th 2012, 00:31 Sun Jun 3, 2012 8:31pm EDT * Euro short hit record high -CFTC * Yen off highs as market wary of intervention By Antoni Slodkowski TOKYO, June 4 (Reuters) - The euro edged back towards a two-year low against the dollar on Monday, failing to maintain gains after disappointing U.S. jobs data as speculation grew that the U.S. Federal Reserve may take more monetary easing steps. The jobs figures suggested the euro zone storm which saw the common currency fall some 6 percent last month, has also taken its toll on the world's largest economy. In addition, data also showed China factory output barely grew while European manufacturing fell deeper into malaise. The euro dropped 0.3 percent to $1.2397 on trading platform EBS, still some distance away from $1.2288, its lowest level since July 2010 that was marked last Friday. "With the U.S. figures out of the way, traders are refocusing sharply on the euro zone and its problems," said Teppei Ino, currency analyst at Bank of Tokyo-Mitsubishi UFJ in Tokyo. "The euro is already moving down, but traders will be cautious ahead of the ECB meeting later in the week. Some will hope that the bank comes up with measures that can support the euro zone bond markets," he said. The euro's sell-off intensified after Spain's borrowing costs spiked on jitters it may need to issue more bonds to bolster its ailing lenders, putting more stress on markets already anxious that Greece may exit the euro zone. Spanish Prime Minister Mariano Rajoy on Saturday called for the establishment of a central authority that would oversee and coordinate fiscal policy in the euro zone. Germany also wants a big leap forward in euro integration, but investors are doubtful whether moves towards closer integration will be able to restore market confidence. For now, market players said there were no reasons to actively buy the single currency, but warned that there could be bouts of short-covering after short positions in the currency surged to 195,361 contracts, the highest on record according to the Commodity Futures Trading Commission. Meanwhile, bets in favor of the U.S. dollar rose to their highest since at least mid-2008. The worries about Spain have been highlighted by a widening in the yield spread between Spanish 10-year government bonds and German Bunds to euro-era highs last week, and the euro has fallen almost in lock step with that move. But the euro edged up 0.2 percent against the yen to 96.93 yen, staying above an 11-1/2-year low of 95.59 yen struck the previous session. With the yen's broad surge last week, including its rise to a 3-1/2-month high versus the dollar, traders have become wary about the potential for Japanese yen-selling intervention. "On Friday Tokyo officials used strong language to warn the markets and help weaken the yen. The threat of intervention is keeping traders on edge," said Bank of Tokyo-Mitsubishi UFJ' Ino. This saw the dollar inch up 0.2 percent to 78.16 yen but still not far off Friday's low of 77.65 yen, the greenback's lowest level against the yen since mid-February. A fall in the 10-year U.S. Treasury yield to a record low last week has cut the yield advantage of Treasuries over Japanese government bonds, and has helped drag the dollar lower against the yen. The Australian dollar fell 0.4 percent to $0.9650. Link this Share this Digg this Email Reprints

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