Germany warns against ‘dreams’ of quick fix for debt crisis
By William L. Watts and Sarah Turner, MarketWatch
FRANKFURT (MarketWatch) — The dollar extended gains versus the euro and most other major rivals Monday after German Chancellor Angela Merkel’s spokesman played down expectations that European leaders will finalize a comprehensive solution to the euro-zone debt crisis at a summit meeting this weekend.
The dollar index DXY +0.59% , which measures the greenback against a basket of six other currencies, traded at 76.941, up from 76.645 in late North American trading on Friday.
The euro EURUSD -0.64% slipped to $1.3771 from $1.3875 on Friday. The shared currency slipped to 106.37 yen EURJPY -0.42% , down 0.7%.
The dollar extended its gain after Steffen Seibert, Merkel’s spokesman, warned against “dreams” that European leaders will resolve all the issues surrounding the debt crisis at a summit meeting in Brussels on Sunday.
“The chancellor has pointed out that dreams building up that this package will mean everything will be solved and over by Monday cannot be fulfilled,” Seibert said, according to Reuters. He said leaders are working on a “long path” that could extend well into 2012. Read Market Pulse about Germany’s warning.
Seibert’s remarks appeared to lift the dollar, while taking the wind out of th sails of risk-oriented assets such as equities. U.S. stock-index futures gave up modest gains and European stocks turned mixed.
“We agree [with Seibert] and believe that expectations for a ‘comprehensive solution’ have perhaps become slightly stretched,” said Chris Walker, currency strategist at UBS.”Policy makers are likely to try and play down these expectations over the next few daysm but the risk of disappointment is now significant.”
The euro made sharp gains on Friday ahead of a weekend meeting of the Group of 20 finance ministers and central bankers. That meeting saw top European officials pledge to reveal a plan by Oct. 23 to try to solve Europe’s troubles.
Barclays Capital currency strategists said: “We need to see bold measures by the European authorities to at least match the market expectations that have been built in anticipation of them.”
They said that the details around any announced measures will be crucial, and “the scope for disappointment remains.”
The British pound GBPUSD -0.37% fell to $1.5743 Monday from $1.5818 late Friday.
The dollar USDJPY +0.23% bought 77.21 yen, down slightly from ¥77.25 in late trading Friday.
William L. Watts is a reporter for MarketWatch in Frankfurt.
Sarah Turner is MarketWatch's bureau chief in Sydney.
