Reuters: US Dollar Report: FOREX-Euro falls as prospect of EU summit progress dims

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FOREX-Euro falls as prospect of EU summit progress dims Jun 28th 2012, 10:30 Tweet Share this Email Print Thu Jun 28, 2012 6:30am EDT * Euro falls to 3-week low vs dollar, yen * German govt source says no detailed decisions at summit * Italy pays dearly to sell bonds, Spanish bond yields rise * Dollar index rises to 3-week high LONDON, June 28 (Reuters) - The euro fell to a three-week low against the dollar on Thursday on growing expectations that a European Union summit starting later in the day will fail to agree concrete measures to deal with the region's worsening debt crisis. If this proves to be the case, the euro would come under further pressure, although analysts said expectations were so low that any unexpected positive development could give the currency a lift. Comments from a German government source on Thursday that the two-day meeting would produce no detailed decisions dampened any lingering hopes of progress. The euro fell to $1.2408, its lowest since June 4. It was last down 0.4 percent at $1.2422. German Chancellor Angela Merkel has consistently opposed the idea of joint euro zone debt and on Wednesday rejected calls from Spain and Italy for action to curb their soaring borrowing costs. "It's rare that we've seen this amount of discord going into a summit," said Chris Turner, head of foreign exchange strategy at ING. "On the face of it it looks like it's going to be reasonably negative for the euro." Traders said the euro extended losses after stop-loss sell orders were triggered on the break below $1.2440. More losses would see it target a two-year low hit in early June of $1.2286. Italy sold more than 5 billion euros in five- and 10-year bonds on Thursday but at elevated borrowing costs. . Spanish 10-year bond yields earlier rose back above 7 percent, a level seen as unsustainable over the long term. The common currency also hit a three-week low versus the yen , while the safe-haven dollar rose to a three-week high against a basket of currencies and a three-week high versus the Swiss franc. "If we get nothing from the European summit then that is more or less what the market is expecting," said Carl Hammer, chief currency strategist at SEB. "If there are some headlines suggesting EU leaders are reaching agreement on curbing bank runs or using the ESM to buy peripheral bonds then that would boost the euro slightly." ECB EYED While concrete steps towards further economic integration of the currency bloc are seen unlikely at present, traders said the euro may be supported by the prospect of the European Central Bank announcing more long-term fund injections at its meeting next week and possibly cut interest rates. Bank Executive Board member Peter Praet said on Wednesday there was nothing to stop the bank cutting interest rates, now at 1 percent, and 48 out of 71 economists polled by Reuters expected a cut. U.S. data offered rare positive surprises on Wednesday, with durable goods orders and pending home sales beating forecasts. That helped lift the Australian dollar to a one-week high of $1.0126. It later fell back to last trade down 0.15 percent at $1.0057. The U.S. dollar fell to a one-week low against the Japanese yen around 79.22 yen, helped by month-end selling by Japanese exporters. Traders also said trading was likely to be influenced by month-end and quarter-end flows in an otherwise thin market ahead of the EU summit. Tweet this Link this Share this Digg this Email Reprints Comments (0) Be the first to comment on reuters.com. Add yours using the box above.

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