The euro fell on Friday as concern about heavily-indebted euro zone states and a weak growth outlook outweighed relief at Greece completing a bond swap that should avert a messy default, while focus turned to US jobs data. However, market attention could soon switch back to euro zone troubles as investors fret about whether Greece or other peripheral euro zone countries may need more funds in the future, especially given a weak euro zone economy.
"The problems for Greece are still there and in the short term the euro could suffer from this ... On a one-month horizon you could see the euro below $1.30," said Asmara Jamaleh, currency strategist at Intesa Sanpaolo in Milan. The euro was last down 0.4 percent at $1.3222, having fallen after the announcement on the debt restructuring deal.
Traders reported bids around $1.3200 and $1.3170/80 that may stem its falls. Equally, however, any gains may be capped by offers at $1.3290/1.3300. "We think Portugal is largely ring-fenced but Spain could be a bigger problem," said Geoffrey Yu, currency strategist at UBS, who target a move towards $1.25 in the euro in three months' time, which he said was based mainly on a relative growth view.
The dollar was up around 0.3 percent on the day at 81.83 yen, close to a 9-1/2 month high of 81.899 yen hit earlier on trading platform EBS, as expectations for further monetary stimulus in Japan continued to knock its currency. Also in focus on Friday, the International Swaps and Derivatives Association said it will meet at 1300 GMT to decide whether Greek credit default swaps will be paid out.
"The base case assumes that this CDS event is well telegraphed and will not trigger stress in the market, although there may be some doubts as to whether those that wrote the protection can pay. We think uncertainty around the CDS event requires a small risk premium in the euro," said ING in a note.