NEW YORK: The euro fell against the dollar on Monday, in a day of volatile day, as investors awaited clarity on when Spain may request a bailout.
Uncertainty over when Madrid will ask for financial aid and whether Greece can agree on new austerity measures with its indebted lenders has discouraged some investors from buying the euro in recent weeks.
But expectations that the euro zone common currency will rally once Spain seeks a rescue package have kept market players from betting heavily against it.
As a result the euro has been trapped in a tight range roughly between $1.28 and $1.31 since mid-September, with options barriers cited below $1.28.
German Chancellor Angela Merkel said on Monday she agreed with her finance minister, Wolfgang Schaeuble, that there would not be any "uncontrollable developments" in the euro zone, like a Greek default or exit from the single currency bloc.
The head of the International Monetary Fund, Christine Lagarde, holds the view that Greece should get more time to meet its bailout targets.
"Spain has yet to request a bailout, and the IMF suggestion of a rescheduling of repayment terms for Greece has received mixed support," said Eric Theoret, currency strategist at Scotiabank in Toronto.
The euro was last down 0.1 percent at $1.2941, recovering from a low of $1.2889 on reported buying by sovereign investors and companies. The session peak posted at $1.2943.
The European Central Bank has said it will buy bonds of countries that apply for a bailout. In Spain's case, such a move would bring down the country's borrowing costs and probably spark a broader increase in investor appetite for risk.
Euro zone officials said Spain could ask for financial aid from next month. The request would probably be dealt with alongside a revised loan program for Greece and a bailout for Cyprus in one big package.
Adding to headwinds for the euro, Italian Finance Minister Vittorio Grilli was quoted as saying on Monday that a 100-billion-euro aid request from Spain to its euro zone partners would cost Italy the equivalent of 1.5 percent of its economic output.
The next focus for investors is a European Union summit this week at which the focus will be on Spain and Greece.
While Greece's prime minister, Antonis Samaras, has said his country is likely to agree to a new austerity package with international lenders at the meeting, a formal request by Madrid for aid is not expected.
"With no important data due the rest of today, headlines out of Europe will be the main driver over the coming 24 hours," said Christopher Vecchio, currency analyst at DailyFX in New York.
Euros worth some $4.488 billion changed hands using Reuters Dealing, compared with $5.7 billion on Friday.
CHINESE EXPORTS
Data over the weekend showed China's exports grew at roughly twice the rate expected in September, while imports also increased, possibly indicating that measures to spur growth in the world's second-biggest economy are working.
That helped demand for riskier assets such as commodity currencies like the Australian dollar. The Aussie edged up 0.2 percent on the day to $1.0251.
The dollar rose 0.4 percent against the yen to 78.72 yen .
A trader for a major Japanese bank in Singapore said the dollar drew some support related to recent media reports that Japanese wireless service provider Softbank Corp was looking to buy a stake in US carrier Sprint Nextel Corp.
The reports last week spurred market talk that such a deal could generate dollar-buying, yen-selling flows in the foreign exchange market.
Softbank Chief Executive Dan Hesse announced in Tokyo on Monday his company will buy about 70 percent of Sprint, the third-largest US carrier, for $20.1 billion.
The dollar rose to a one-week high against the yen after data showed US retail sales rose in September as Americans bought more cars and gasoline. A rise in retail sales excluding autos, gas and building materials, which is considered a gauge of consumer spending, pointed to stronger-than-expected economic growth in the third quarter.
Comments
Comments are closed for this article.