MW: Euro rebound stalled, regional uncertainty renewed
By Arti Patel and William L. Watts, MarketWatch
SAN FRANCISCO (MarketWatch) — The euro’s rebound in the wake of last week’s stronger-than-expected U.S. jobs data stalled Monday due to renewed political uncertainty.
The euro traded at $1.2415, turning up from its $1.2375 level late Friday, when the European unit shot up as investors moved away from the safe-have dollar after U.S. nonfarm payrolls rose by a stronger-than-expected 163,000 in July. Read more on Friday’s forex action.
Italian Prime Minister Mario Monti warned of rising tensions within the euro zone over the weekend, while Italian and Spanish officials indicated they remain reluctant to ask the region’s rescue funds for help. An aid request, which would be accompanied by strict policy conditions, is a prerequisite for potential participation by the European Central Bank in any bond-buying measures aimed at capping borrowing costs for the likes of Spain and Italy.
German officials, meanwhile, renewed arguments against fresh bond purchases by the ECB outside an established structure.
Spain and Italy require “time or a catalyst event” before they take steps toward asking for an ECB package, according to Greg Anderson, G-10 strategist for Citi.
“Can [Spain or Italy] afford yields this high for months on end? No,” Anderson said. “They probably have months more time to decide barring some contagion event like Greece missing bond payments on August 20 or something like that.”
A light calendar of scheduled news may also hinder the euro’s ability to rise further.
“There are no debt auctions, no European officials are speaking; we’re light on data,” Anderson said. “We have to see, to get above Friday’s levels, that traders prefer an option above the short squeeze.”
Among other currencies, the Australian dollar AUDUSD +0.12% traded to $1.0587, little changed from its level late Friday.
On Tuesday, the Reserve Bank of Australia is due to hand down its latest policy decision.
The Japanese yen USDJPY -0.55% moved higher, as the dollar slipped to ÂĄ78.18 from ÂĄ78.59 at the end of last week.
The ICE dollar index DXY -0.21% — which tracks the currency against six others — was little changed at 82.270 versus 82.390 on Friday.
The WSJ dollar index XX:BUXX -0.23% , which likewise gauges the greenback’s moves against some of the world’s other heavily traded currencies, was turned down to 71.29 from 71.51.
The British pound GBPUSD +0.05% also lost ground Monday, easing slightly to $1.5625 from $1.5644.
Arti Patel is a MarketWatch reporter, based in San Francisco.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt. Michael Kitchen in Los Angeles contributed to this report.
