Reuters: US Dollar Report: FOREX-Euro gains seen vulnerable to ECB disappointment

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FOREX-Euro gains seen vulnerable to ECB disappointment Sep 6th 2012, 08:38 Thu Sep 6, 2012 4:38am EDT * Euro trades near two-month high versus dollar * Scope for bond-buying plan to fall short of expectations * Any euro weakness seen limited, support around $1.25 By Nia Williams LONDON, Sept 6 (Reuters) - The euro edged up versus the dollar on Thursday but looked fragile on concerns the European Central Bank's latest plan to tackle the region's debt crisis, expected to be announced later, could lack detail. The single currency has risen in recent weeks on growing speculation ECB President Mario Draghi will unveil a new bond-buying programme aimed at curbing high Spanish and Italian borrowing costs. But with expectations running high many market players warned there was scope for disappointment, given Draghi may be unable to disclose specifics of the plan. "I think Draghi will disappoint in the respect he will not give us a fully-fledged list of details which would allow us to asses the risks or the chances of his programme," said Ulrich Leuchtmann, head of FX research at Commerzbank. "But I don't think we will see a collapse in the euro or a collapse in the Spanish bond market because we are only missing details." Leuchtmann said if Draghi's news conference at 1230 GMT did fall short of expectations the euro could test the previous day's low of $1.2501 before finding support. The single currency was last up 0.2 percent at $1.2627, close to last week's peak of $1.26378, which was its highest since early July. It rallied sharply on Wednesday after a string of leaks from euro zone officials provided markets with more confidence that Draghi will try to back up his pledge to do "whatever it takes" to save the euro. But most market players saw limited gains for the euro even if the ECB does give details. Two central bank sources told Reuters on Wednesday Draghi would give no details of planned amounts or explicit targets for spreads or interest rates. Citi strategists said in a note the single currency could rally temporarily beyond $1.2650, while one London-based FX trader said he would take profit on any rally around $1.2710. A German Constitutional Court ruling on the euro zone bailout fund is scheduled for Sept. 12, meaning many investors would be wary of initiating large positions before then. Before Draghi's news conference the ECB will also announce its rate decision at 1145 GMT. Rates are expected to stay unchanged at 0.75 percent, which could help support the euro. "The euro could gain further if the ECB does not cut rates today given that some market players have been expecting a rate cut, even though latest media reports suggest a rate cut is not on the cards this time," said Yunosuke Ikeda, senior FX strategist at Nomura. SWISS FRANC FALLS The euro gained against the Swiss franc, hitting a one-month high of 1.2063 francs. The franc has fallen sharply against the euro in the past two sessions on market talk that the Swiss National Bank has been buying euros to protect the euro/Swiss franc floor at 1.20 francs. The SNB has declined to comment. A rate cut by the Swedish Riksbank boosted the single currency against the Swedish crown to a seven-week peak of 8.5520 crowns. The euro's broad rise saw the dollar index retreat to 81.115, near a 3-1/2 month low of 80.964 hit on Friday. The dollar held steady at 78.42, within its familiar range around 78.50 yen. The Australian dollar bounced back from a fresh eight-week low on a wave of short-covering after a surprise fall in Australian jobless rate, though other figures pointed to a soft labour market. It rose 0.5 percent to US$1.0241, off a low of US$1.0165. Sterling stood at $1.5909 against the dollar, near Wednesday's four-month high of $1.5940, ahead of a Bank of England's policy announcement on Thursday. The BoE is expected to keep rates and its quantitative easing total unchanged. Link this Share this Digg this Email Reprints

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