Euro falls in Asia

The euro hit 16-month lows against the dollar and sterling on Friday and hovered near an 11-year low versus the yen, with further declines seen in store for the embattled single currency. Market players said little relief was in sight for the euro, with next week's Italian and Spanish government bond sales likely to keep the market on edge and the euro under pressure.
The euro dipped to as low as $1.2763 on trading platform EBS on Friday, its lowest level since September 2010. After trimming some losses the euro stood at $1.2777, down 0.1 percent from late US trade on Thursday. Against sterling, the single currency touched a 16-month low of 82.445 pence. The euro's drop helped buoy the dollar to as high as 81.062 against a basket of currencies at one point, the highest level for the dollar index in about a year.
Even a meeting between France's Nicolas Sarkozy and German Chancellor Angela Merkel on Monday may not produce much euro positive news, said Daisuke Karakama, market economist for Mizuho Corporate Bank in Tokyo. "Media reports have said that discussions at the Sarkozy-Merkel meeting will focus on the issue of enforcing budget discipline. But I don't think that's what the market is looking for," Karakama said.
The euro could rise sharply on short-covering if a decision is reached at some point to increase the firepower of the ESM, but the single currency is likely to remain under pressure until then, Karakama said. It may take a few months to reach such a decision, with French Prime Minister Francois Fillon having said on Thursday that a March summit of European Union leaders will discuss increasing the clout of the ESM.
Ahead of his meeting with Merkel next week, Sarkozy is due to meet Italian Prime Minister Mario Monti later on Friday. Investors are particularly concerned about the borrowing costs of Italy, which must pay out 100 billion euros in bond coupons and redemptions in the first four months of 2012 alone. Against the yen, the euro dipped 0.1 percent to 98.63 yen, just above an 11-year low of 98.451 yen hit on Thursday. The dollar edged up 0.1 percent against the yen to 77.22 yen, pulling away from a two-month low of 76.30 yen hit earlier this week.