By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) — The U.S. dollar traded flat to lower versus major rivals on Monday, holding steady versus the euro after European leaders vowed to complete a plan to deal with the euro-zone debt crisis this week, while losing ground versus the Japanese yen despite a threat by Japanese authorities to intervene.
The euro EURUSD +0.16% traded at $1.3860, little changed from $1.3865 in North American trade late Friday. The shared currency traded toward $1.3900 in earlier action, buoyed after European officials, including German Chancellor Angela Merkel and French President Nicolas Sarkozy, said they would complete a plan at a Wednesday summit meeting.
The Wednesday gathering will be the second this week after a Sunday summit of European leaders focused on technical details.
“The weekend EU summit has clearly not solved the crisis. However, bearing in mind the slow progress at which European politics tends to operate, there was a reasonable flow of news and sufficient progress to keep euro bears at bay,” said Jane Foley, senior currency strategist at Rabobank International.
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EU leaders eye bank guarantees
European leaders say at a summit on Sunday in Brussels they are confident that they will find a definitive solution to the European financial crisis but that there is still work to do.
Leaders indicated agreement toward a plan to require banks to shore up capital, while ruling out using the European Central Bank to boost the European Financial Stability Facility’s firepower. Negotiations are also continuing over calls to require private-sector bondholders to accept larger haircuts on Greek debt holdings beyond the 21% write-downs agreed at a July 21 summit. Read about the Sunday summit meeting
While EU leaders still have a long way to go before they reach agreement, market participants appear willing to give EU leaders the benefit of the doubt for now, Foley said. But a lack of clarity regarding Greek haircuts and EFSF leverage beyond Wednesday would likely trigger disappointment, she said.
Support for the euro was undercut after data showed the Markit composite purchasing managers index for the region fell to 47.2 in October, signaling a further contraction in private-sector activity and marking the lowest reading since July 2009. Read Market Pulse about October euro-zone PMI data.
The dollar index DXY +0.20% , which measures the U.S. unit against a basket of six major rivals, slipped to 76.346 from 76.404 on Friday.
The dollar changed hands at 76.11 Japanese yen USDJPY -0.03% , down slightly from ¥76.17 on Friday. During Friday’s trade, the dollar fell as low as ¥75.76, according to FactSet Research data, a new record low versus the Japanese currency.
The dollar temporarily bounced higher versus the yen in Asian trade after Japanese Finance Minister Jun Azumi raised the prospect of imminent intervention to curb the yen’s rise.
But analysts questioned whether intervention would be able to stem the yen’s rise. Read more: Yen may extend gains despite intervention threat.
The British pound GBPUSD +0.07% bought $1.5942, little changed from $1.5941 on Friday.
William L. Watts is a reporter for MarketWatch in Frankfurt.
