By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) — The European shared currency slipped in range-bound trade Tuesday, a day after setting a six-week high versus the U.S. dollar, as investors await a Wednesday summit of European leaders aimed at delivering a comprehensive response to the euro-zone debt crisis.
The euro EURUSD +0.14% traded at $1.3928 versus the U.S. dollar, down slightly from $1.3934 in North American trade late Monday.
“Markets are increasingly nervous ahead of the Wednesday EU meeting, likely taking profit before recovering later in the day as we remain” in a buy-on-dips trading environment, said Sebastien Galy, currency strategist at Societe Generale.
German Chancellor Angela Merkel is expected to present the nation’s parliament with a plan that would see the 440 billion euro (about $600 billion) European Financial Stability Facility leveraged to provide around €1 trillion in firepower. A vote is expected ahead of Wednesday’s summit.
Negotiations continue over efforts to reduce Greece’s debt burden in part by asking private bond holders to take bigger write-downs than the 21% agreed in July. The Financial Times reported that negotiators have asked bondholders to take 60% haircuts on the face value of Greek bond holdings.
“Markets seem comfortable with leaked details of the grand plan,” said Sue Trinh, senior currency strategist at RBC Capital Markets in Hong Kong.
The dollar index DXY -0.15% , which measures the U.S. unit against a basket of six major rivals, edged higher to 76.203 from 76.082.
The dollar has been undercut and overall risk appetite buoyed by further rumblings by U.S. Federal Reserve policy makers over the potential for a further round of quantitative easing, analysts said, with New York Federal Reserve President William Dudley on Monday saying the Fed could do more to help the housing market.
“While our U.S. strategists think it’s highly unlikely additional policy easing is in store at next week’s [Federal Open Market Committee] hearing, they do not doubt additional policy action — particularly if sold in the context of the damaged housing sector — is in tow,” Trinh said.
The U.S. unit bought 1.0018 Canadian dollars USDCAD -0.37% , down 0.2% from Monday ahead of a rate decision by the Bank of Canada.
“The BOC is set to stay on hold but expected to change its mandate to include financial stability, while USD/CAD heads for a break below parity,” Galy said.
The dollar changed hands at 76.20 Japanese yen USDJPY +0.06% , up from ¥76.06 on Monday.
The British pound GBPUSD +0.11% traded at $1.5980, little changed from $1.5984.
William L. Watts is a reporter for MarketWatch in Frankfurt.
