The euro steadied against the dollar Tuesday as investors fixed their gaze on a coming meeting of euro-zone finance ministers to discuss Greece's pending bailout payments and shrugged off overnight news that France's sovereign debt rating had been downgraded.
Shorty before noon in London, the euro was trading at $1.2809 compared with $1.2813 late Monday in New York. The dollar was at ¥81.38 compared with ¥81.41, while the euro was at ¥104.26 compared with ¥104.05. Meanwhile, the pound was trading at $1.5926 compared with $1.5896 late Monday in New York.
The euro had fallen to as low as $1.2764 in early Asian trade after Moody's Investors Service MCO +2.69% stripped France of its coveted triple-A rating. French government bonds were little changed after Moody's cut France's rating to Aa1 from Aaa, mirroring a similar move by Standard & Poor's Ratings Services in January.
Dietmar Horning, a lead analyst for Moody's, said that France's downgrade could affect the ratings of the euro zone's bailout facilities. France is the second-largest contributor to the euro zone's bailout facilities known as the European Financial Stability Facility and its permanent replacement the European Stability Mechanism. But currency traders were mostly unperturbed, enabling markets to remain steady.
"Had this downgrade occurred at a time the EFSF/ESM was being used heavily this might be more of a concern than it is," said Jim Reid, a strategist at Deutsche Bank DBK.XE -3.28% in London in a note to clients.
"Markets have got over the shock of some of the major economies of the world losing their top rating, so this move probably won't have much short-term impact. Greece, the Middle East and particularly the fiscal cliff remain the main short-term drivers," Mr. Reid added.
European finance ministers are due to meet later today to agree the release of a long-delayed €31.5 billion ($40.36 billion) aid payment to Greece. Some Eurogroup officials said overnight that the meeting would address only how to bridge a €5 billion gap in the country's financing through to 2014, but wouldn't decide how to tackle the additional €17.6 billion Greece will need to stay financed from 2014 to 2016.
The one thing parties seemed to agree on, the officials said, was that no new funding beyond what's already been agreed should be made available to the country.
Elsewhere, the Norwegian krone rose against the euro as Norway's economic growth slowed in the third quarter but by less than expected. Mainland gross domestic product, which strips out oil and shipping activity, expanded 0.7% in the three months to Sept. 30 compared with the previous quarter as the country felt the slowdown elsewhere in Europe.
Looking ahead, a survey of economists by Dow Jones Newswires suggested the Turkish central bank would cut the upper end of its interest rate corridor by 0.5 percentage point to 9% at noon in London.
