Euro rises versus US dollar

The euro rebounded from a three-week low against the US dollar on Thursday, but analysts said persistent worries about Europe's debt crisis would limit gains and could lead to a renewed decline in the new year. The euro hit a session low of $1.3056, according to Reuters data, its worst showing in three weeks. It was last up about 0.1 percent at $1.3110, up about 0.2 percent.
The dollar fell 0.6 percent to 82.99 yen in thinned trade, with Tokyo closed for a national holiday and ahead of Christmas in the United States and Europe. With only a week of trading left in the year, the euro was down more than 8.0 percent against the dollar in 2010.
Anlaysts said the euro would hold above $1.30 for now, as traders refrained from making big bets before year-end. "We are looking for euro/dollar stability above $1.30 moving to the end of the year," said Sacha Tihanyi, currency strategist at Scotia Capital in Toronto. "With the late November and early December tests at that level, and the subsequent failure of euro/dollar to sustainable break below, I'd say that 1.30 looks like strong support." But the outlook for the currency remains shaky, with fresh losses seen in 2011.
More ratings downgrades for European countries, including euro zone member Portugal, stoked fear that a debt crisis that has already engulfed Ireland and Greece may spread further. But the euro, which earlier fell below its 200-day moving average for the fourth straight day, rebounded as investors took profits and after Standard & Poor's reaffirmed its AAA rating for France, the euro zone's second largest economy.
The cost of insuring French debt against default rose earlier this week amid speculation that it too could one day face a ratings downgrade. The Swiss franc weakened as investors booked profits on a rally lifted it to record highs against the euro for six straight days. The euro zone debt crisis has prompted investors to flock to the safe-haven Swiss franc in recent weeks.
The euro was up 0.9 percent at 1.2580 Swiss francs after hitting an all-time low of 1.2440 on Wednesday. The dollar rose 0.8 percent to 0.9589 francs. After hitting record lows against the franc for several consecutive days, the euro's rebound provided a chance for traders to push it higher, especially with volume so low, said BNY Mellon strategist Michael Woolfolk.
But Elsa Lignos, currency strategist at RBC Capital Markets, said as long as concerns about the euro zone debt crisis persist, "a lower euro/Swiss is very hard to fight." The euro also got a boost after a Chinese Foreign Ministry spokeswoman said China was willing to help countries in the euro zone return to economic health. The Jornal de Negocios reported this week that China may buy 4 billion to 5 billion euros of Portuguese sovereign debt. But CMC Markets analyst Michael Hewson warned that "China will have to buy a lot more than 5 billion euros if it expects to have any impact on negative sentiment surrounding Europe."