Reuters: US Dollar Report: FOREX-Euro near 2-week low as EU summit hopes fade

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FOREX-Euro near 2-week low as EU summit hopes fade Jun 26th 2012, 03:52 Mon Jun 25, 2012 11:52pm EDT * Euro undermined by receding hopes on EU summit * For now support for euro/dlr seen around $1.2443 * Yen off 2-month low, ponders if Noda can stay on By Hideyuki Sano TOKYO, June 26 (Reuters) - The euro was on the defensive near a two-week low against the dollar on Tuesday on growing worries that an upcoming European summit would produce nothing to solve the region's debt crisis. The broad risk-averse mood helped to lift the Japanese yen sharply from a two-month low against the dollar, though the currency could be hit by political uncertainty in Tokyo as Japanese Prime Minister Yoshihiko Noda faces a revolt against his tax hike plan. The euro fell to as low as $1.24713 on Monday, its lowest since June 12 and last stood at $1.2505, almost flat from late U.S. levels. Support was seen near the June 12 low around $1.2443, At which sizable bids were detected, though a break below that level would open the door to a test of the two-year low of $1.2288 hit on June 1. German Chancellor Angela Merkel dashed any lingering hope in financial markets on Monday that Europe would issue common euro zone bonds to help indebted countries, calling such an idea "economically wrong" and "counterproductive." Greece's new finance minister resigned on Monday due to ill health, throwing the government's drive to soften the terms of an international bailout into confusion, while Prime Minister Antonis Samaras had said he was not attending the summit, having just emerged from hospital himself after eye surgery. Cyprus became the fifth euro zone country to turn to Brussels for help, a move that highlights Europe's failure to contain the ever-deepening debt crisis, even though its economic impact would be negligible given the size of the country's economy. And Spain also formally requested euro zone rescue loans for up to 100 billion euros ($125 billion) to recapitalise its debt-laden banks, though it said the final amount of financial assistance would be set later. All of these served to quash hopes that European policymakers will come up with solid measures to deal with the ongoing crisis at its June 28-29 summit that is now threatening not just Spain but Italy, the bloc's third largest economy. "Yesterday in Asia, people were saying they would wait for the summit. But it's becoming almost pointless to wait for it," said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp. The euro also fell below 100 yen to fetch 99.72 yen , having dropped more than one percent on Monday after having failed to break a 38.2 percent retracement of its March-May decline at 101.64 last week. A daily close below near-term trendline support at 99.51 will indicate its corrective rebound so far this month is coming to an end, analysts at RBC Capital Markets said. SHOWDOWN IN TOKYO The dollar also fell about a full cent to 79.74 yen from a two-month high of 80.63 yen hit on Monday, failing to stay above a key chart level from the top of weekly Ichimoku cloud at 80.41, in one bearish sign. Strong resistance prompted some hedge funds that had built yen short positions on speculation about more easing by the Bank of Japan are giving up on their bets, said a U.S. bank trader. Still, some market players think the yen could come under pressure if a large number of ruling party lawmakers revolt against Noda's tax hike plan, which could force him to call an early election. Noda looks certain to win parliament's approval for his signature tax hike plan in a vote expected around 0420-0520 GMT on Tuesday, thanks to support from the two main opposition parties. But with a number of ruling party lawmakers threatening to vote against the bills and to leave his Democratic Party of Japan, he is facing risk of losing a parliamentary majority, which could lead to an early election. Link this Share this Digg this Email Reprints

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