WSJ:WORLD FOREX: Euro Off Lows In Asia, Remains Vulnerable To Headlines
-- Euro comes off earlier lows but remains vulnerable to headlines out of Europe
-- Hopes for breakthrough still alive amid intensifying global pressure
-- Traders want to see who will ultimately provide money to solve debt crisis
By Tatsuo Ito
Of DOW JONES NEWSWIRES
TOKYO (Dow Jones)--The euro came off its earlier lows against the dollar in Asia on Friday as the market was jolted by a mixture of hopes and concerns over the outcome of a crucial European Union summit to tackle Europe's sovereign debt crisis.
The single currency earlier tumbled to as low as $1.3309 on speculation that the meeting is unlikely to produce any breakthrough. But amid intensifying global pressure on Europe to resolve the issue, hopes for some kind of final agreement persisted, deterring the single currency from falling below the key $1.3300 mark.
At 0450 GMT, the euro was at $1.3335 from $1.3339 late Thursday in New York, according to EBS. The common currency was at Y103.45 from Y103.59.
"The overall picture for solving the debt problem remains uncertain, particularly the key issue of who will provide money to settle the crisis," said Yoshio Yoshida, a trader at Mizuho Trust and Banking. "Unless this whole picture comes into view," it is tough to justify buying the euro, he added.
The European Central Bank President Mario Draghi on Thursday repeated that the bank's program of government debt purchases is "neither infinite nor eternal." Draghi was also decidedly cool on the prospect of lending money to the International Monetary Fund so that the IMF could in turn lend money back to troubled euro-zone governments.
"The support effect for the euro on the back of expectations for the summit is likely to keep diminishing," said Barclays Capital chief Japan strategist Masafumi Yamamoto.
"It is all down to making a political decision," said Mizuho's Yoshida added. "But if Europe spends too much time deciding on the structure of its rescue funds, risk-off trade will strengthen in the jittery markets," he added.
European Union leaders were still trying to bridge differences of opinion early Friday on the future roles of the euro zone's bailout fund mechanisms, the transitional European Financial Stability Facility and the newly proposed permanent rescue fund, the European Stability Mechanism.
Yoshida said that if the summit succeeds in clearing up these points, a rally of the euro to as high as $1.3700 over the next week would not be surprising.
Meanwhile, weaker-than-expected consumer price index data in China raised speculation for a further credit easing there, providing support for risk sentiment, traders said.
The dollar was at Y77.58 from Y77.63 and at CFH0.9260 from CHF0.9259. The U.K. pound was at $1.5617 from $1.5640.
The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at 78.868 from 78.828.
Interbank Foreign Exchange Rates At 2350 EST / 0450 GMT
