By William L. Watts and V. Phani Kumar, MarketWatch
FRANKFURT (MarketWatch) — The euro stabilized versus the dollar in quiet Monday trading, erasing an early loss on speculation that European leaders will move to strengthen fiscal union across the shared-currency region.
The euro EURUSD +0.17% changed hands at $1.2437, recovering after slipping as low as $1.2384. The currency stood higher than the $1.2422 seen in late North American trade on Friday.
News reports over the weekend indicated European officials are weighing a move to increase fiscal coordination across the euro zone. The Wall Street Journal late Sunday said Germany has signaled it may be open to euro bonds or further support for the region’s banking sector, provided other countries agree to transfer more power to Europe. Read about the report.
“Such policy would move the [euro zone] toward a much more integrated fiscal union providing much better credit support for the region including the prospect of euro bonds,” said Boris Schlossberg, director of currency research at GFT.
The Journal report noted there was no guarantee European leaders will overcome differences, saying that calls to give up sovereignty over national budgets are likely to meet fierce resistance in some member states.
Meanwhile, the ICE dollar index DXY -0.03% , which measures the greenback’s performance against a basket of six other major currencies including the euro and Japan’s yen, slipped to 82.780 from 82.878. Overall activity was light, with London markets closed for a public holiday.
The dollar fell Friday, after official data showed the U.S. added just 69,000 jobs in May, far below expectations for growth in nonfarm payrolls in the largest global economy. Read more about the payrolls report.
The dollar USDJPY +0.08% fetched 78.09 yen after briefly trading below the ÂĄ78 mark earlier in the day.
On Friday, the dollar had dropped to a low of ¥77.63 after the downbeat May nonfarm payrolls data, but quickly jumped to ¥78.68. Some analysts suspected those moves were because of intervention conducted by the Bank of Japan, although Japanese authorities hadn’t confirmed such a move. Read Friday’s Currencies report.
On Monday, Finance Minister Jun Azumi declined to comment on possible foreign-exchange intervention, according to a Kyodo News report. In Tokyo, stocks fell sharply to begin the trading week. Read Asia Markets.
The yen, which like the dollar and the Swiss franc is widely considered to be a safe-haven currency, generally tends to rise during periods of market volatility.
But Japanese officials, worried about the impact of a rising local currency on the country’s economy and exporters, have often warned they would act to suppress the currency’s ascent.
On Friday, for example, Azumi and Vice Finance Minister Takehiro Nakao had each warned of intervening in the markets if the yen rose amid volatility. Read full report on Friday’s warning about intervention.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt.
Varahabhotla Phani Kumar is a reporter in MarketWatch's Hong Kong bureau.
