Euro surrenders six-week high in New York

Greece's unresolved debt restructuring knocked the euro from a six-week high against the US dollar and drove it to a 4-1/2-month low against the safe-haven Swiss franc on Monday. The euro did cut some of the earlier losses after European Union leaders reached an agreement on the introduction of a permanent euro zone financial bailout mechanism, with details to be worked out at a later date.
"The leaders' agreement on a permanent ESM (European Stability Mechanism) was announced and the euro had a 30 pip move higher. There is also a squeezing of the short-euro position in the market, but I think once the dust settles the euro slides back," said Joe DeGeronimo, chief dealer at SMBC. To start, the lack of a breakthrough in Greek debt talks pushed yield spreads between German Bunds and debt of euro-zone peripheral nations wider, adding to downward pressure on the euro. An auction of Italian government bonds went off smoothly but did little to calm concerns.
Negotiations between Greece's private creditors and the government on accepting voluntary losses on sovereign debt carried over through the weekend in Athens. A hoped for agreement, despite stated progress, was not reached before the EU leaders summit.
Michael Woolfolk, a senior currency strategist at BNY Mellon in New York said: "What's surprising is that the euro is as strong as it is. Market action is suggesting the downside risk for the euro is not as once feared." The single currency was last down 0.68 percent on the day to $1.3134, according to Reuters data, having hit a six-week high in early trade but falling as low as $1.3074 in the New York session. Valentin Marinov, a London-based strategist for Citi, said apart from uncertainty about a Greek debt deal, worries about its near-term fiscal outlook would remain.
The euro is on track for gains against the dollar this month but overall sentiment is bearish as the debt crisis rumbles on and the prospect of a euro-zone recession looms.
The euro fell to a 4-1/2-month low against the Swiss franc at 1.2034 francs, according to Reuters data, but traders said large bids were preventing a move toward the Swiss National Bank's franc cap of 1.2000. The pair traded at 1.2053 in afternoon New York activity.
Against the yen, the euro fetched 100.20 yen, down 1.18 percent, according to Reuters data, after earlier touching a one-week low. The Australian dollar moved further away from a three-month peak hit in the wake of the US Federal Reserve's pledge last week to keep interest rates low and after rating agency Fitch put major Australian banks on a negative ratings watch.
The Aussie fell 0.54 percent on the day, off its lows, to $1.0594, according to Reuters data, with traders citing selling by leveraged players amid a pullback in risk appetite. The dollar extended its losses 0.51 percent to 76.28 yen, according to Reuters data, just above a session low of 76.20 yen, which is the lowest since Japanese authorities intervened on October 31 to weaken the Japanese currency.