Reuters: US Dollar Report: FOREX-Euro hits more than 3-week low as EU leaders meet

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FOREX-Euro hits more than 3-week low as EU leaders meet Jun 28th 2012, 16:25 Thu Jun 28, 2012 12:25pm EDT * Euro falls to 3-week low vs dollar, yen * Italy pays dearly to sell bonds, Spanish bond yields rise * Dollar index rises to 3-week high By Wanfeng Zhou NEW YORK, June 28 (Reuters) - The euro fell against the dollar for a fourth straight day on Thursday to hit its lowest in more than three weeks as doubts persisted that a summit of European leaders will make progress in resolving the region's deepening debt crisis. But investors were reluctant to punish the euro further as expectations for the summit were also very low. Any surprise positive development could spark a short-squeeze and give the common currency a lift, analysts said. "The fact that we're not lower than we are right now is partially because investors are still hesitant to put on any major positions on the off chance that we do get some kind of a surprise from Europe," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. European Union leaders began the summit on Thursday deeply divided over how to resolve the euro zone's debt crisis. Officials were working on urgent measures to ease financial market pressure on Spain and Italy, which are too big to bail out. French President Francois Hollande said he expected agreement on emergency steps to help euro zone partners whose borrowing costs had reached unsustainable levels. The euro fell as low as $1.2405 on Reuters data, the weakest since June 4. It was last down 0.3 percent at $1.2433. 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. The euro also came under pressure after a spokesman for German Finance Minister Wolfgang Schaeuble said that a report that Germany could be willing to move sooner than expected to accept shared liability of euro zone debt was not true. Against the yen, the euro slid 0.8 percent to 98.64 , having earlier fallen to 98.30 yen, the lowest since June 6. Spanish 10-year yields hovered near the 7 percent level that forced other highly indebted countries to seek bailouts. Investors worry that Spain, the euro zone's fourth-largest economy, will have to ask for aid in excess of the 100 billion euros already approved for Madrid to bail out its banks. Italy sold more than 5 billion euros in five- and 10-year bonds but at elevated borrowing costs. Analysts said that with the market so focused on the outcome of the summit, trade in the euro would remain choppy and driven by headlines during the meeting. "If you are a day trader it's easy to jump on different headlines but if you are a normal trader you have to wait and see what actually gets decided," said David Bloom, head of FX research at HSBC in London. "But it will be hard to be disappointed when expectations are so low." ECB EYED The prospect of active anti-crisis steps from the European Central Bank, possibly including more long-term fund injections and cutting interest rates, could support the euro. ECB 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 next week. There are "some expectations that the ECB may have to pick up the slack for EU policymakers," Esiner said. "There's growing expectation that we could see either an interest-rate cut by the ECB or some sort of new liquidity operations. Either of those would be mildly supportive for the euro." The dollar fell to a one-week low against the yen around 79.21 yen, helped by month-end selling by Japanese exporters. It was last down 0.5 percent at 79.34. The safe-haven dollar rose to a three-week high against a basket of currencies and also a more than three-week peak versus the Swiss franc. With the market focused on Europe's debt problems, there was little impact from a U.S. Supreme Court ruling on Thursday upholding the centerpiece of President Barack Obama's signature healthcare overhaul law that requires most Americans to get insurance by 2014 or pay a penalty. Earlier, data showed the number of Americans filing new claims for jobless benefits fell last week but remained too high, indicating the job market was struggling to gain traction. The report had little impact on currencies. Link this Share this Digg this Email Reprints

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