Euro struggles in Asia

The euro languished near an 11-month low against the dollar on Thursday, struggling to make much headway after the European Central Bank's tender brought little respite to funding markets and nudged traders to snap up gains. The ECB's first ever limit-free, ultra-cheap loans did little to lower the cost for banks to borrow dollars and it was unclear whether the 523 banks that tapped them will lend the cash on and boost the ailing European economy or just sit on it.
This saw the euro come off its overnight high of $1.3199 to fetch $1.3044 in Asia. Embattled by the ongoing debt crisis, it hovered 12 percent below its 2011 peak hit in early May and was down some 2.5 percent on the year. There was also little evidence so far that the banks would jump into the "carry-trade" - borrow three-year debt from the ECB at 1 percent and invest in Spanish or Italian bonds at 5 or 7 percent, pulling the borrowing costs of those countries down.
"With the tender out of the way, we are turning to the hurdles waiting for the euro next year - potential sovereign credit rating cuts, more stress in dollar funding and possibly recession in Europe," said Masahide Sato, vice president at Mizuho Corporate Bank's forex division in Tokyo. The eurozone bond markets are expected to come under fresh pressure with some 230 billion euros of bank bonds, up to 300 billion in government bonds, and more than 200 billion euros in collateralised debt all maturing in the first quarter of 2012.
The euro's failure to pierce through a layer of offers above the $1.32 mark and tackle the critical $1.3235-50 resistance area was likely to force it to resume its march south, with the 11-month low of $1.2945 hit last week and then the 2011 tough of $1.2860 coming in sight, traders said.
As the euro stabilised, the dollar index was also little changed at 80.006 - not far from last week's 11-month peak of 80.73. The greenback stayed tethered to the ever-prevailing range against the yen, last fetching 78.05. It has been tied to a roughly 2-yen-wide band since Tokyo stepped into the market to stem its currency's strength on October 31. The Australian dollar followed weakness in Asian bourses and retreated 0.2 percent on the dollar from a 10-day peak of around $1.0220. It was last at $1.0080, after finding decent support at its 21-day moving average of $1.0060.