Monday, Mar 22, 2010
By Don Curren
OF DOW JONES NEWSWIRES
TORONTO (Dow Jones)--After slumping to three-week lows earlier Monday, the euro rebounded in late morning trading and returned to its late Friday levels after risk appetite recovered and as U.S. stocks advanced.
The dollar also surrendered its gains against the pound but remained higher against the New Zealand, Australian and Canadian dollars.
Uncertainty about the situation in fiscally troubled Greece and the associated aversion to risk dominated most of the morning session. In mid morning trading, the euro slumped through the $1.3500 mark to a session low at $1.3463, its lowest level since March 2, after Greece Deputy Prime Minister Theodore Pangalos warned that if European Union leaders fail to address the problem in Greece it will harm the integrity of the euro zone.
But investor's reluctance to invest in risk ebbed as the session progressed, enabling the euro and other risk-sensitive currencies to recover.
"We did see equities turning around from slightly negative to positive territory and providing some support for the euro's comeback," said Matthew Strauss, senior currency strategist at RBC Capital Markets.
The euro's rebound late Monday provides confirmation its earlier fall through $1.3500 was driven in part by technical factors, Strauss said.
In late morning trading Monday, the euro was at $1.3519 from $1.3535 and at Y121.67 from Y122.47, according to EBS via CQG. The dollar was at Y90.04 from Y90.50. The dollar was at CHF1.0596 from CHF1.0610 while the pound was at $1.5054 from $1.5016.
The ICE Dollar Index, which tracks the U.S. currency against a trade-weighted basket of currencies, was at 80.772 from 80.740. The euro was at CHF1.4322 from CHF1.4361.
The dollar slumped to a session low at Y89.83 against the Japanese yen in response to the earlier flight-to-safety, and was unable to fully recover even as that flow subsided.
"I would say that was consistent with the pullback in risk appetite and the demand for safer, lower-yielding assets," said Omer Esiner, senior currency market analyst at Travelex Global Business Payments in Washington, D.C.
News that the U.S. House Sunday gave final approval to a far-reaching health-care overhaul bill, promising to bring health insurance to 32 million Americans, had no direct impact on the currency market, he said.
"I think it might take some time to digest the implications from at least a fiscal standpoint, in the U.S.," Esiner said.
Currency markets remain on alert for intervention from the Swiss National Bank as the euro sinks even further toward CHF1.43. Some analysts warn the Swiss central bank could be faced with an even more difficult task of halting the franc's rise if the euro slides below that October 2008 low.
Initially, the dollar benefited and the euro fell as the market digested a weekend interview by German Chancellor Angela Merkel, in which she denied any plans to help Greece.
She warned against raising "false expectations" in financial markets that a solution will be found at the European Union summit starting this Thursday. She said Greece hadn't asked for any funding and that the issue isn't on the agenda for the summit.
But Merkel is open to aid for Greece from the International Monetary Fund in an emergency, her spokesman said Monday.
"In this case, financial aid from the IMF is definitely a topic for the chancellor and the German government," spokesman Ulrich Wilhelm said Monday.
Currency markets were also rocked by events on the other side of the world Friday when India announced a surprise increase in interest rates, bringing speculation that other robust emerging markets, especially those in Asia, will follow suit. The prospect of reduced global demand hit commodity prices and added to downward pressure on global stock markets.
-By Don Curren, Dow Jones Newswires; 416-306-2020; don.curren@dowjones.com
(Alkman Grantisas in Athens and Nick Hastings in London contributed to this article.)
(END) Dow Jones Newswires
March 22, 2010 11:50 ET (15:50 GMT)
