WORLD FOREX:Euro Struggles For Direction As Market Eyes Franco-German Summit

Monday, Dec 05, 2011

-- Euro struggles for direction at start of pivotal week for euro zone

-- Euro helped modestly after Italian Prime Minister outlines measures aimed at balancing Italy's budget

-- Market focusing on Franco-German summit later in day


 
   By Kosaku Narioka 
   Of DOW JONES NEWSWIRES

TOKYO -(Dow Jones)- The euro struggled for a direction Monday in Asia, at the start of a pivotal week for the euro zone, as market participants await additional measures to be taken by European leaders to prevent further escalation of the European sovereign debt crisis, with a Franco-German summit slated for later in the global day.

The euro gained modestly versus the dollar and the yen earlier in the day after Italian Prime Minister Mario Monti, in his first test since taking office two weeks ago, outlined a three-year plan comprising tax increases, spending cuts, pension overhauls and growth-boosting measures.

Still, the common currency soon lost steam as Asian stock markets were mixed despite solid U.S. non-farm payroll data Friday that failed to further improve risk-sentiment, dealers said.

German Chancellor Angela Merkel and French President Nicolas Sarkozy are set to meet later in the day, ahead of the European Union's two-day summit starting Thursday.

"If they offer a future direction (for the euro zone) that makes sense to the market, that will be viewed favorably," said Tsunemasa Tsukada, chief manager of forex and financial products trading at Mitsubishi UFJ Trust and Banking. "But, putting a broad plan to one side, if they show differing opinions on the details, that will likely heighten uncertainty."

Merkel is so far defying pressure from Sarkozy to stop the capital flight from euro-zone government bond markets by resorting to radical measures, such as giving a green light to the European Central Bank for massive bond-market intervention.

"Various people involved are giving a wide range of comments these days," Mitsubishi UFJ Trust and Banking's Tsukada said. "We want real evidence" of European leaders have a definitive plan, he said.

Masafumi Yamamoto, chief currency strategist at Barclays Bank in Tokyo, said the euro has upside risk, given the excessively large positions in the market betting for a decline in the common currency, which makes investors vulnerable to any euro-positive cue.

Meanwhile, the dollar remained firm versus the yen, benefiting from bids for the greenback for year-end funding reasons, said Citibank Japan chief FX strategist Osamu Takashima.

The euro was at $1.3405 as of 0450 GMT from $1.3392 late Friday in New York, and was at Y104.55 from Y104.40, according to EBS. The dollar was at Y77.98 from Y77.94 and at CHF0.9225 from CHF0.9219. The U.K. pound was at $1.5601 from $1.5613.

The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at 78.617 from 78.636.


 
Interbank Foreign Exchange Rates At 2350 EST / 0450 GMT 
 
 
                           Latest       Previous   %Chg    Daily    Daily   %Chg 
Dollar Rates                               Close            High      Low  12/31 
 
USD/JPY Japan          77.99-8.00       78.01-06  -0.05    78.10    77.94  -3.85 
EUR/USD Euro            1.3404-06      1.3422-27  -0.15   1.3424   1.3398  +0.10 
GBP/USD U.K.           1.5599-604      1.5624-31  -0.17   1.5625   1.5588  -0.04 
USD/CHF Switzerland     0.9222-26      0.9203-14  +0.17   0.9227   0.9201  -1.35 
USD/CAD Canada          1.0173-78      1.0162-70  +0.09   1.0186   1.0158  +2.29 
AUD/USD Australia       1.0212-16      1.0252-57  -0.40   1.0257   1.0212  -0.20 
NZD/USD New Zealand     0.7767-72      0.7809-19  -0.57   0.7811   0.7770  -0.35 
 
Euro Rate 
EUR/JPY Japan           104.53-56      104.72-84  -0.23   104.77   104.54  -3.76 
 
Source: ICAP Plc.