Euro flat versus dollar

The euro was flat against the dollar on Tuesday after a report said eurozone leaders will discuss boosting the firepower of their rescue fund at a summit this week, offsetting a threat from Standard & Poor's to slash credit ratings across the region. The Swiss franc weakened against both the euro and dollar on speculation the Swiss National Bank could intervene and raise the floor on the euro/Swiss franc from the current 1.20 level.
Markets were in a holding pattern ahead of a policy meeting by the European Central Bank on Thursday and a crucial summit of European leaders on Friday. Optimism policymakers would deliver a comprehensive solution to tackle the region's debt crisis has helped the euro recently. European leaders will discuss boosting the firepower of the bailout fund at this week's summit, the Financial Times reported on its website, citing senior European officials.
The euro climbed to a New York session high after the report and last traded at 1.3398, little changed on the day. Traders expect offers between $1.3430-50 to cap potential gains. The common currency earlier came under pressure after S&P on Monday placed its long-term sovereign ratings on 15 eurozone countries, including top-rated Germany and France, on CreditWatch negative, which normally means a chance of downgrade within three months.
The ratings agency fired a second warning shot on Tuesday, threatening to cut the top-notch rating of the eurozone's 440 billion euro rescue fund, the European Financial Stability Fund. The ECB is widely expected to cut interest rates and throw more funding lifelines to stressed banks toiling against the eurozone's debt crisis. Most banks expect the ECB to cut by 25 basis points, with less than a 10 percent chance of a 50 basis point cut, a Reuters poll found.
A deeper-than-expected cut could give the euro and other riskier currencies a brief lift, analysts said. Still, any bounce is likely to be limited to short covering, and levels around $1.3550 should offer resistance. The ECB has so far been reluctant to buy bonds of heavily indebted states, concerned this would take the pressure off them to sort out their finances, but signalled it may change its stance, depending on what EU policymakers produce.
The euro jumped against the Swiss franc after data showed a growing risk of deflation in Switzerland. Market talk that the Bank of International Settlements was buying euros on behalf of the Swiss National Bank. Both the SNB and BIS declined comment. The single currency rose to its highest against the franc since November 17, and last traded up 0.7 percent at 1.2413. The dollar rose 0.7 percent to 0.9262 franc. Against the yen, the greenback was little changed at 77.71 yen, again struggling to break the 78.00 yen barrier.