SymbolPriceChangeBNP.PA30.83-1.40
(Changes dateline, adds quotes, detail, previous TOKYO)
* Euro at 2-month low vs dollar, 6-month low vs yen
* ECB shift away from tightening bias cuts support for
single currency
* July low of $1.3838 in focus; G7 meets but expectations
low
LONDON, Sept 9 (Reuters) – The euro fell to two-month lows
versus the dollar and a six-month trough against the yen on
Friday, with risks building for deeper falls after the European
Central Bank (Other OTC: CBSU.PK – news) dropped its tightening bias and forecast lower euro
zone growth.
The market showed little reaction to U.S. President Barack
Obama’s $447 billion package on jobs, made up largely of tax
cuts for workers and businesses, due to doubts over whether he
can push it through a divided Congress.
The European Central Bank held rates steady at its policy
meeting on Thursday, saying inflation risks are no longer skewed
to the upside and that economic growth in the region will be
slow at best, prompting money markets to fully price in a rate
cut by the year-end.
“The ECB has now left the door open for an easing of policy
and there are more downside risks to come for the euro with
Greek PSI (private sector involvement) to be finalised and
ratification of the EFSF (European Financial Stability Fund)
still required,” said Kiran Kowshik, currency strategist at BNP (Paris: FR0000131104 – news)
Paribas.
The euro fell to $1.3857 on trading platform EBS, its lowest
since mid-July and was last down 0.1 percent on the day at
$1.3876. A close below $1.3900, a 50 percent retracement of the
currency’s rally from January to May, could raise the case for
more weakness, with its July low a target at $1.3838. A break
below there would take it to its lowest level since mid-March.
“The euro now doesn’t have the support of expectations for
rising interest rates, which clearly points to the higher
possibility that the euro will fall below (its July low near)
$1.38,” said Minori Uchida, senior analyst at the Bank of
Tokyo-Mitsubishi UFJ.
Technical analysts said the clean break below the euro’s
200-day moving average earlier in the week was a bearish signal.
The 200-day is now seen as resistance at $1.4024.
Traders reported keen interest to sell any euro rally, with
offers reported in the $1.3940/60 area.
The common currency fell to a six-month low of 107.47 yen,
slipping below Thursday’s base of 107.56. Against the Swiss
franc, it eased to slightly to 1.2113 franc , still
above the 1.20 floor set by the Swiss National Bank.
G7 EXPECTATIONS LOW
Another potential pitfall for the euro is uncertainty over
Greece’s debt swap plan. Friday is the deadline Athens has given
investors in Greek bonds to say whether they intend to take part
in its debt exchange offer, a key part of a second 109 billion
euro bailout package it clinched on July 21 to avoid bankruptcy.
Because of the time needed to process all responses, however,
Athens has no plan to announce the result on Friday.
Greece had threatened to cancel the deal unless it got a 90
percent participation, a stance some banks think may just be
tactics by Athens to get most bondholders on board.
Still, a low participation rate in Greece’s debt swap could
mean reluctant euro zone partners will have to cough up more
cash for the overall package to work.
The dollar also lacked traction after Obama’s long-awaited
job proposals failed to boost hopes of a U.S. recovery. U.S.
jobless claims unexpectedly rose last week, highlighting the
fragile state of the U.S. job market.
Federal Reserve Chairman Ben Bernanke offered little new
insight as to what the central bank will do at its policy
meeting on Sept. 20-21 in his speech on Thursday, though most
players remain convinced that the bank will start buying
longer-dated bonds in a bid to try to lower longer bond yields.
The dollar index stood at 76.259, having surged to
two-month highs of 76.319 on Thursday. Against the yen, the
dollar stood flat at 77.48 yen .
Finance ministers and central bankers from the G7 economic
powers meet in Marseille on Friday with global slowdown and debt
crises pressuring them to find new solutions, and currency
intervention back on the table, but expectations for action are
low.
Japanese Finance Minister Jun Azumi called for the G7′s
understanding on Japan (NYSE: MCO – news) ‘s intentions to counter speculative moves
in the yen, after Switzerland set a floor for the euro/Swiss
pair to stem strength in the Swiss franc this week.
“Switzerland is not in the G7 and the ECB has already said
the SNB (Swiss: SNBN.SW – news) is on their own. Swiss action was clearly unilateral and
I am not expecting anything big to come out of G7,” said BNP
Paribas’ Kowshik.
(Additional reporting by Hideyuki Sano; Editing by Hugh Lawson)
