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The euro gave back some of its recent gains on Friday as investors assessed official action to stabilise investor sentiment.
The euro had rallied sharply on Thursday after the European Central Bank, along with other leading global central banks, announced they would provide three-month dollar liquidity to the market, a measure that helped ease concerns over European banks’ funding requirements.
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The single currency had also found support after Angela Merkel, German chancellor, and Nicolas Sarkozy, French president, sought to reassure investors that Greece would not be allowed to default on its debt.
The euro’s retreat on Friday, however, came as investors awaited an Ecofin meeting later in the session, which, along with European finance ministers, Tim Geithner, US Treasury Secretary, was set to attend.
Derek Halpenny at Bank of Tokyo-Mitsubishi UFJ said it was possible that the euro might push higher against the dollar if new plans to deal with the eurozone sovereign debt crisis or problems in the banking sector emerged.
He was sceptical that any significant progress would be made, however.
“Given the fears in the banking sector, a coordinated plan to recapitalise banks in the eurozone is likely to be required to stabilise sentiment, and that does not appear to be the focus of eurozone leaders,” said Mr Halpenny.
“Expect more volatility around this meeting but don’t expect dramatic policy announcements.”
The euro fell 0.6 per cent to $1.3805 against the dollar, was 0.6 per cent weaker at Y105.90 against the yen and fell 0.6 per cent to £0.8732 against the pound.
The Swiss franc retreated, falling 0.5 per cent to SFr0.8739 against the dollar and dropping 0.5 per cent to SFr1.3809 against the Swiss franc.
A rally on Asian stock markets lifted investor confidence and boosted demand for commodity-linked currencies.
The New Zealand dollar climbed 0.7 per cent to $0.8294 against the US dollar and the Australian dollar rose 0.2 per cent to $1.0349.
Elsewhere, the dollar was little changed at $1.5809 against the pound and unmoved at Y76.73 against the yen.
