Tuesday, 27 December 2011

Forex - Euro remains vulnerable in holiday-thinned trade

Forexpros - The euro hovered close to an eleven-month low against the U.S. dollar on Tuesday and was mixed against its other major counterparts, as concerns over the handling of the debt crisis in the euro zone continued to dominate market sentiment.

During European early afternoon trade, the euro was higher against the U.S. dollar, with EUR/USD up 0.10% to hit 1.3072, trading within striking distance of an eleven-month low.

With markets in the U.K., Canada and Australia remaining closed for an extended holiday break and most investors already away on year-end leave, trading volumes were low, resulting in subdued trade.

The single currency remained under pressure as the yield on Italian ten-year bonds rose earlier Tuesday above the 7% threshold, a level widely considered to be unsustainable, adding to concerns over the country's financial woes.

Meanwhile, Spain's new government predicted negative economic growth in the final quarter of 2011 and the first quarter of the new year, technically putting the country back into recession.

The euro was lower against the pound, also hovering close to an eleven-month trough with EUR/GBP down 0.07% to hit 0.8347.

Earlier Tuesday, the Telegraph reported that the U.K. is considering plans to restrict the flow of money in and out of the country, in order to protect the economy in the event of a full-blown break-up of the euro zone.

The single currency was lower against the yen and the Swiss franc, with EUR/JPY easing 0.08% to hit 101.75 and EUR/CHF retreating 0.15% to hit 1.2204.

A report showed earlier that Switzerland's UBS consumption indicator declined in November, falling for the first time in three months, edging down to 0.81 from 0.90 the previous month.

Meanwhile, in the minutes of the Bank of Japan's latest policy meeting, several policymakers indicated that financial turmoil caused by the euro zone's debt woes and the yen's appreciation are increasing risks for growth in Japan.

Elsewhere, the euro was moderately lower against the Canadian dollar, but higher against the Australian and New Zealand dollars, with EUR/CAD inching down 0.04% to hit 1.3320, EUR/AUD adding 0.13% to hit 1.2858 and EUR/NZD advancing 0.13% to hit 1.6884.

Also Tuesday, data showed that the use of the European Central Bank's overnight deposit facility reached a new, all-time high Monday, as euro zone banks increasingly turned to the ECB as a safe-haven for extra funds.

The report added to speculation that the central bank's three-year loan operation last week did little to strengthen the region's banking sector.

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