Dollar struggles in London

The euro edged up on Monday, helped by a rise in European shares, while the dollar was on the back foot on speculation the Federal Reserve may highlight this week the need to take additional measures to support the ailing US economy. Traders said Switzerland's central bank was intervening in the one-month Swiss franc forward market to drive down the forward rate and to deter potential investors from holding the buoyant franc. The Swiss National Bank (SNB) declined to comment.
That kept investors jittery that the SNB could resort to selling francs in the spot market, a tool which it is reluctant to use given losses incurred on its last round of intervention which ended in 2010. Traders also speculated that Japanese authorities could soon intervene to weaken the yen and that kept the dollar buoyed above an all-time low versus the yen.
The latest IMM positioning data shows speculators increased their bets against the dollar last week. The euro traded 0.3 percent higher on the day at a session high around $1.4434 against the dollar, supported by a 1.3 percent rise in European shares which picked up after tumbling 6 percent last week. US stock futures were also in the black.
The single currency traded 0.4 percent higher on the day against the Swiss franc at 1.1350 francs. Its one-month forward interest rate adjustment was around -27.00, falling towards roughly -30.40 hit last week. In a bid to tame the surging franc, the SNB in the past few weeks has been selling short-dated francs in the forward market to flood the market with the currency and drive down its returns.
The euro's gains were limited as sentiment remains negative on the view that eurozone officials are continuing to drag their feet in solving the region's debt problems. This was highlighted by comments from German Chancellor Angela Merkel, who on Sunday rebuffed calls for the eurozone to issue joint euro-denominated bonds as a way for fiscally weak eurozone countries to borrow.
"If things start to take a turn for the worse in the eurozone, it's hard to see what they can come up with to help," said Richard Falkenhall, currency strategist at SEB in Stockholm, adding that this risk would keep the euro on the back foot. The dollar rose 0.3 percent to 76.77 yen. It rebounded from a fall to 75.94 yen late last week, its weakest level since World War 2, which had ramped up speculation that Tokyo will prop up the dollar against the yen. Japanese officials have said they are ready to intervene to weaken the yen again after last stepping in to sell the yen aggressively on August 4.