Reuters: US Dollar Report: FOREX-Euro dips as scepticism over ECB action grows

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FOREX-Euro dips as scepticism over ECB action grows Sep 5th 2012, 08:43 Wed Sep 5, 2012 4:43am EDT * Euro stop-loss orders said to lie below $1.2475 * Euro zone data gloomy, adds to euro sell off * Aussie skids to eight-week low on China slowdown fears By Anirban Nag LONDON, Sep 5 (Reuters) - The euro fell on Wednesday on scepticism among investors such as sovereign funds that steps by the European Central Bank to stem the debt crisis could fall short of market expectations. But losses were likely to be limited as some still bet the ECB would announce on Thursday details of a bond-buying programme to lower Spanish and Italian borrowing costs. The euro was down 0.4 percent at $1.2515. Its fall from a two-month high of $1.26378 hit on Friday on trading platform EBS highlighted growing investor caution. In Asian trade, it fell through reported stop-loss orders at Tuesday's low of $1.2555, as well as at $1.2550, which was a 50 percent retracement of its recent rise from $1.2465 on Aug. 28 to Friday's high. More stops were said to lie below $1.2475. "Many are concerned that the ECB may just give us bare bones while others are of the view that even if they give details to the plan, it would be a good time to sell the currency as the economic data from the region has been deteriorating," said Jane Foley, senior currency strategist at Rabobank. "These factors have been sapping the euro and this will be the prevailing tone in the run-up to the ECB meeting tomorrow." The euro has risen from a two-year low of $1.2042 in late July since ECB chief Mario Draghi pledged he would do everything to preserve the currency, suggesting possible intervention in bond markets to lower peripheral countries' borrowing costs. He told European lawmakers on Monday that purchases of short-term sovereign bonds to help debt-burdened countries would not breach European Union rules, according to a recording obtained by Reuters. Investors are keen to know the size of any bond purchases and the tenors that the ECB intends to buy. Some have said that unless it sets no limits on its bond purchases, investors could use the opportunity to sell to the ECB, threatening the success of the bond-buying plan. That could also weigh on the euro. "Some investors are wary that the euro's rally ahead of the ECB meeting will turn out to be, 'buy the rumour, sell the fact'," said Kimihiko Tomita, head of foreign exchange for State Street Global Markets in Tokyo. Additionally, investors will be cautious about the euro given the economy is struggling, putting pressure on the ECB to lower interest rates in the coming months. Data on Wednesday confirmed French and German services sectors contracting in August, showing the economic rot was spreading well beyond the periphery. U.S. DATA Beyond the ECB meeting, investors will look at U.S. non-farm payrolls data on Friday. A weaker-than-expected number could bolster expectations of more quantitative easing by the Federal Reserve, perhaps later this month. The dollar was steady at 78.38 yen. The Australian dollar hit an eight-week low of $1.0167 on speculation the Reserve Bank will cut interest rates to cushion the economy from falling commodity prices. The Bank of Canada meets on Wednesday and investors will look beyond its expected decision to keep the main policy rate at 1 percent to focus on whether Governor Mark Carney will change the message that the central bank may need to hike rates. Some analysts say he may change tack and that could weigh on the Canadian dollar, which was lower on the day. The U.S. dollar was up 0.3 percent at C$0.9888. "Many observers believe that Governor Carney will have to change now that both the ECB and the Fed look to provide further easing measures maybe as early as this month," said Dean Poppelwell, chief currency analyst at OANDA. But he expected the Canadian dollar to draw support from sovereign investors diversifying out of the dollar and the euro. Link this Share this Digg this Email Reprints

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