European, IMF officials to visit Dublin for stabilization talks
By William L. Watts and Lisa Twaronite, MarketWatch
LONDON (MarketWatch) — The dollar was little changed versus major rivals, while the euro posted a marginal loss on Wednesday, a day after a meeting of euro-zone finance ministers failed to produce an agreement on a bailout for Ireland.
“With no progress on the Irish bailout situation traders had little fresh news to consider as the meeting of European ministers in Brussels comes to a close later today,” said Boris Schlossberg, director of currency research at GFT.
The euro (EURUSD 1.3488, +0.0002, +0.0148%) slipped to $1.3478 from $1.3493 late Tuesday. The British pound (GBPUSD 1.5887, +0.0004, +0.0252%) traded at $1.5880, little changed on the day.
Strategists said the euro remains vulnerable to further selling pressure, however, as uncertainty over the Irish debt situation lingers. The single currency came under pressure Tuesday as it became apparent a rescue package wouldn’t be finalized during a meeting of euro-zone finance ministers.
A meeting of finance ministers from all 27 European Union nations was under way Wednesday. Officials from the European Commission, the European Central Bank and the International Monetary Fund will visit Ireland this week to discuss stabilization efforts after concerns about Ireland’s budget picture contributed to soaring borrowing costs for Dublin and pushed up bond yields in other high-deficit euro-zone countries. Read more on Ireland, EU, IMF bank talks.
“Amid uncertainty about whether Ireland accepts EU aid, euro/U.S. dollar fell below $1.35, and the drop may continue towards $1.3420,” wrote strategists at UniCredit Bank in Milan. "If Ireland tapped EU aid, there may be some rebound, but we do not expect a jump for joy,” with the euro likely to rebound only toward the $1.3700 to $1.3800 level.
The U.S. dollar index (DXY 79.23, +0.02, +0.03%) , which measures the greenback against a basket of six major currencies, edged marginally higher to 79.245 from 79.215 in late North American trading on Tuesday.
Part of the dollar’s gains this week was due to rising Treasury yields. While yields — which move inversely to prices — fell Tuesday, the yield on the benchmark 10-year note had its biggest gain since June 2009 in the previous session.
That happened despite the U.S. Federal Reserve’s $600 billion bond-buying program, its second round of such quantitative easing, called QE2.
“One inadvertent significant beneficiary of QE2, or, rather, its failure to keep U.S. yields down, has been Japan,” said Uwe Parpart, chief Asia strategist at Cantor Fitzgerald. “Yen strength is slowly fading as the yield differential between U.S. and Japanese government bonds grows,” he said in emailed comments.
Against the Japanese yen, the dollar (USDYEN 83.4300, +0.1500, +0.1801%) rose to ¥83.44 from ¥83.31 late Tuesday.
