WORLD FOREX: Euro Rises After Belgian Auction As Bets Reversed

Monday, Nov 28, 2011

--Euro, riskier currencies start the week in buoyant mood

--Belgian auction helps, despite growth worries

By Eva Szalay

Of DOW JONES NEWSWIRES

LONDON (Dow Jones)--The euro and other currencies deemed risky enjoyed a bounce in European trade Monday, along with shares, as traders reversed negative bets and expressed some relief that the Belgium government had sold all its bonds at an auction after its credit rating was downgraded before the weekend.

The euro's rebound was helped by speculation over the weekend that the International Monetary Fund was in talks with Italy to secure a potential bailout package and that Germany and France were close to agreeing a deal that would make budget discipline legally enforceable in euro-zone countries.

The IMF denied the rumors, while Germany said there were no plans to issue a common bond with other triple-A-rated euro-zone countries to stabilize their credit rating and create a firewall to protect the euro zone and its currency. The early rally nonetheless prompted investors to scramble to liquidate some of their so-called short positions--namely their bets against the euro.

"There are limits to how short you can get," said Kit Juckes, a currency strategist at Societe Generale in London. "When there is a bounce you tend to cover shorts quickly because it can bounce so much, so quickly that it's easy to get caught out."

The bounce in the euro, and in the Australian and New Zealand dollars, came as the risk-premium investors attached to peripheral euro-zone government bonds fell compared with safe-haven German bunds. Even so, borrowing costs for some euro-zone countries remained near euro-era highs, with yields on ten-year Italian bonds still trading above 7% and underlying demand for the euro wilting.

"We note that the traditional sellers of the euro against the dollar--asset managers--show no sign of changing direction," UBS said in a note to clients.

Belgium sold a total of EUR2 billion of bonds at auction, as planned, despite worries that the newly downgraded papers would garner limited interest ahead of a busy euro-zone debt auction schedule and amid a deteriorating economic backdrop.

Reinforcing the negative growth outlook in major economies, the Organization for Economic Cooperation and Development said the euro zone has fallen into a recession.

The euro shrugged off the growth concerns and sterling was unaffected by data showing that sales volumes in the country have slumped to their lowest level since March 2009.

Emerging market currencies were steady, following the more positive tone in the euro.

At 1120 GMT, the euro was trading at $1.3378 compared with $1.3246 late Friday in New York according to EBS via CQG. It was at Y103.88 from Y102.89. The dollar traded at CHF0.9194 from CHF0.9315, while it traded at Y77.69 from Y77.76.

The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at about 78.869 from 79.611.


 
Forex spot:       EUR/USD    USD/JPY    GBP/USD    USD/CHF 
 
Spot 1119 GMT     1.3379     77.68      1.5587     0.9191 
3 Day Trend       Bearish    Bullish    Bearish    Range 
Weekly Trend      Bearish    Range      Bearish    Bullish 
200 day ma        1.3895     79.17      1.5975     0.8860 
3rd Resistance    1.3481     78.27      1.5695     0.9406 
2nd Resistance    1.3430     78.01      1.5665     0.9307 
1st Resistance    1.3399     77.79      1.5615     0.9258 
Pivot*            1.3270     77.56      1.5461     0.9280 
1st Support       1.3273     77.57      1.5516     0.9175 
2nd Support       1.3230     77.46      1.5460     0.9154 
3rd Support       1.3212     77.32      1.5425     0.9108 
 
 
Forex spot:       AUD/USD 
 
Spot 1119 GMT     0.9936 
3 Day Trend       Bullish 
Weekly Trend      Bearish 
200 day ma        1.0246 
3rd Resistance    1.0185 
2nd Resistance    1.0108 
1st Resistance    0.9958 
Pivot*            0.9718 
1st Support       0.9870 
2nd Support       0.9834 
3rd Support       0.9818