WSJ:WORLD FOREX: Dollar Weakens As Cautious Optimism Lifts Euro
By Alexandra Fletcher
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--The dollar was broadly weaker in European trading hours Tuesday as investors shifted funds back into the euro and other riskier currencies and as news continued to trickle through to suggest euro-zone leaders might be closing in on a credible crisis package ahead of tomorrow's key leaders' summit.
But dollar losses faded slightly as the morning wore on as currency traders took stock of the remaining hurdles in Europe, including disagreements over the size of writedowns on Greek debt, lingering tensions of the state of Italy's reform program and a fragile economic backdrop.
Against the dollar, the euro reached a session high of $1.3950, with sterling hitting a six-week peak of 1.6012 and the Australian dollar hovering just below $1.05.
"Negotiations ahead of tomorrow's summit meeting are toughening up and so there has been a positive response from the market," said Ian Stannard, senior currency strategist at Morgan Stanley. "Euro gains are likely into the meeting but they will be limited as attention focuses back to the economic fundamentals."
In Asia, the People's Bank of China fixed the dollar's central parity rate against the yuan at an all-time high of CNY6.3425, while the Japanese yen briefly weakened to Y76.31 against the dollar before drifting back toward Friday's record high in the face of lingering intervention worries.
The Turkish lira was broadly unmoved after Turkey's central bank said it will sell a relatively low maximum of $50 million at its daily foreign exchange auction, ahead of a package of policy measures expected Wednesday.
Looking ahead, the Bank of Canada will make an interest rate decision at 1300 GMT. Some analysts hold the opinion that the central bank will abandon its implied tightening bias and shift back to a neutral stance.
At 1041 GMT, the euro was trading at $1.3949 against the dollar, compared with $1.3929 late Monday in New York, according to trading system EBS. The dollar was at Y76.16 against the yen, compared with Y76.09, while the euro was at Y106.19 compared with Y106.02. Meanwhile, the pound was trading at $1.6021 against the dollar, compared with $1.6019 late Monday in New York.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 76.006 compared with 76.083 late Monday in New York.
A summary of key levels for chart-watching technical strategists is below:
