Reuters: US Dollar Report: FOREX-Euro falls vs dollar as summit expectations dim

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FOREX-Euro falls vs dollar as summit expectations dim Jun 28th 2012, 12:21 Tweet Share this Email Print Thu Jun 28, 2012 8:21am EDT * Euro falls to three-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 three-week high By Nia Williams LONDON, June 28 (Reuters) - The euro fell to a three-week low against the dollar on Thursday on 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 could come under further pressure, although analysts said expectations were so low that any surprise positive development could give the common currency a lift. Comments from a German government source that the two-day meeting would produce no detailed decisions dampened lingering hopes of progress. The euro also gave up brief gains after German officials dismissed a report that the country had changed its stance on euro bonds. The common currency fell to $1.2408, its lowest since June 4, and was last down 0.3 percent at $1.2429. 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 summit. "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. "But it will be hard to be disappointed when expectations are so low." 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. Some market players said the those lows could be tested if signs of discord between euro zone leaders deepened. 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." 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. ECB EYED Beyond the summit, traders said 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. The dollar fell to a one-week low against the yen around 79.22 yen, helped by month-end selling by Japanese exporters. 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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