The euro slipped against the dollar on Thursday a day after hitting an almost one-month high, as investors refocused on worries about European banks and a deteriorating growth outlook for the eurozone. Disappointing trade data from China further weighed on risk appetite and pressured the euro. The common currency's recent move has correlated closely with investor demand for stocks and other risky assets.
European Central Bank policy makers warned on Thursday that the eurozone could fall back into recession. The ECB also warned that forcing private bondholders to accept losses on eurozone sovereign debt could damage the euro and hurt banks. Thursday's pause suggested investors are cautious about pushing the euro higher given the barriers policy makers face to finding a lasting solution to the bloc's spreading debt crisis.
"Over the last week we have seen a major short squeeze in a number of risk-sensitive assets, including in euro/dollar. But the fundamental picture remains clearly negative," said Jens Nordvig, head of G10 currency strategy at Nomura in New York. The euro last traded slightly down at $1.3786, retreating from a high of $1.3834 set on trading platform EBS on Wednesday, the strongest level since mid-September.
It pared some losses after Slovakia's parliament backed a plan to bolster the euro zone's rescue fund, the European Financial Stability fund, concluding the ratification process in all 17 eurozone countries. Despite Thursday's pullback, the euro was up 2.9 percent so far this week, a gain that if maintained through Friday would mark the strongest weekly performance since mid-January.
Analysts cautioned that even with a strengthened EFSF, European banks are still vulnerable to a Greek default and further sovereign downgrades. Against the yen, the euro slipped 0.5 percent to 105.99 yen, retreating from a one-month high at 107.035 yen recorded on EBS on Wednesday.
Investors awaited this weekend's meeting of the Group of 20 rich and emerging nations that could result in more assurances for investors after leaders from Germany and France pledged to announce a plan to solve the debt crisis by the end of the month. "This weekend could be a turning point for the beleaguered common currency," said Brendan McGrath, senior analyst at Western Union Business Solutions in Victoria, British Columbia. Against the yen, the dollar fell 0.5 percent to 76.84, pulling back from a one-month high around 77.489 yen reached on EBS on Wednesday.
Comments
Comments are closed for this article.