Euro slips in Asia

The euro slipped in Asia on Monday, and was expected to struggle going into the year-end after the European Union agreed on deeper economic integration but fell short of a convincing plan to deal a decisive blow to the region's debt woes. The currency fell to a session low of $1.3334 after Moody's ratings agency said the two-year-old crisis is still in a "critical" and "volatile" stage, adding that the region is prone to further shocks and faces rising threats to cohesion.
Except for Britain, the EU states decided at a summit to pursue stricter budget rules for the single currency area and to provide up to 200 billion euros in bilateral loans to the International Monetary Fund to help tackle the crisis. But uncertainty about the drawn-out process of implementing changes, a bitter divide between the UK and the rest of Europe, almost no mention of policies aimed at boosting the ailing European economy, and no emphatic action on cash-starved European banks undermined the outcome of the summit.
The euro fetched $1.3340, down 0.4 percent from $1.3371 late in New York on Friday. It is now almost 6 percent below its October peak and 10 percent off its 2011 high of just under $1.50, struck in early May.
On top of that, they said they were waiting for a response from Standard & Poor's which, right before the summit, warned it may carry out a credit downgrade of eurozone countries en masse if they fail to move decisively to stem the crisis. The euro avoided further selling, supported by a Reuters report that China planned a new $300 billion vehicle to invest in Europe and the United States, traders said.
It remained tethered in a well-trodden $1.3200-$1.3500 band seen since late November and technically appeared to be in a flag formation, with parameters at 1.3250-70 and 1.3460. The longer the 1.3250-70 base holds, the greater the risk of a break higher towards 1.3600, traders said.
Such a temporary break could also happen because IMM data showed only a small reduction in the speculative short euro base, thus raising the potential for a short-covering corrective rally in the euro, analysts said. On the downside, a break of $1.3250 support could lead to a test of $1.3210 and then $1.3145.
With the euro on the backfoot, the dollar index remained in the consolidation mode it has been in since its 6.7 percent rally from October 27 to November 25 ran out of steam. It was last up 0.22 percent at 78.83. But against the Swiss franc, the dollar climbed 0.4 percent and last changed hands at 0.9262 francs. The dollar was flat on the yen, last trading at 77.65 yen.